Property tax, also known as municipal tax, is an annual tax levied by the state or local municipal body. It is charged on real estate assets which are tangible and are owned by an individual or an entity. Property tax is also levied on improvements made to land, such as the construction of a building, house, etc.
Vacant plots which do not consist of any adjoining construction are usually exempted from property tax. Qualifying property owners are thus supposed to pay property tax online or offline to the respective state government, municipal council or panchayat.
The amount collected through property or municipal tax is devoted to the maintenance of that particular locality. It is used to repair roads, street lights, maintain proper sewage conditions, build schools and parks, and so on. The tax rates levied on property ownership is not the same throughout India and varies from one city to another, depending on certain factors.
Estimation of property tax in India
Different municipal bodies adopt varying mechanisms to calculate property or house tax. Predominantly, there are three ways in which property tax in India is estimated. They are as follows:
Annual Rental Value System
This system is based on an estimated gross annual rent of a property, as fixed by the concerned municipal corporation. It does not refer to the actual rent paid for the property. Instead, it refers to the maximum amount of rent which could be expected from it. Factors such as property location, surroundings, availability of basic amenities, transportation, etc. play a role in determining the annual rent of a particular property. Municipal corporations of cities like Chennai and Hyderabad usually follow this method of tax calculation.
Unit Area Value System
Under this method, property tax is calculated based on the price fixed per unit value of the built-up area or carpet area of a property. This price determines the probable tax payable from a property. Property owners of Kolkata, Bangalore, Patna, Ahmedabad, and New Delhi usually pay property tax online or offline based on this system.
Capital Value-based System
This method uses the market value of a property as the basis to estimate municipal tax. The market value of a property is determined by the concerned government based on the ward in which that land/property is situated. Market values are revised on an annual basis. Most municipalities in Mumbai, like Brihanmumbai Municipal Corporation, follow this method to calculate house tax.
A property owner must be well-aware of the taxation and its timely payment if he/she wishes to avail a loan against property in the near future, as the receipts generated can prove to be crucial property documents for such advances. A state government may also imply certain exemptions on property tax payment.
How can you pay property tax online?
Individuals can now avail the facility to choose an online mode of tax payment over the traditional payment mode, which requires them to visit the municipal office. To pay municipal tax online, you will first need to enquire if your municipal council provides the facility of online tax collection. If yes, then you can follow these simple steps to pay property tax online:
Step 1: Go to the designated official portal of your municipal council.
Step 2: Look for the ‘Property Tax’ payment tab on the home page.
Step 3: Select the property type (residential or commercial) for which you are paying the property or land tax online.
Step 4: Enter the details of your property tax number, Khatha number, revenue survey number, etc. correctly.
Step 5: Select the assessment year for which you are paying the property tax.
Step 6: Confirm your entries via the form appearing on the screen.
Step 7: Tally the outstanding tax amount in the bottom with your tax bill to check if they are correct.
Step 8: Proceed to the payment page. You can pay property tax online through net banking, credit card or debit card.
Step 9: Keep the hard copy of the receipt as a proof of payment once the online transaction is complete.
You must pay off property tax online or offline in time to ensure all property documents are in place when planning to avail mortgage advances like loans against property.
Also, you should clear debts and other fees and charges for availing a loan against property with minimum hassle. Lending institutions verify your property and ask for property documents before sanctioning such loans. You must be able to provide accurate property papers like tax bills and other payments for easy verification and approval.
Delaying or not paying your property tax in time is among some of the things which you must avoid when borrowing a loan against property. Being a responsible property owner is the key to utilising it for maximum benefits, including borrowing funds against your property.
You may also look for unique pre-approved offers on loans to fulfil your fund requirements. These offers not only save time but also enable a hassle-free application process. It takes you one step closer to availing funds like loans against property and home loans. By providing your name and contact details, you can check the pre-approved offer online.
Several state governments have facilitated online tax payment on their portal so that individuals can pay their tax dues conveniently. Maintaining proper records of house tax is thus simpler than ever now.