Basics on Property Tax

Property is a massive phrase that encompasses real estate, such as buildings and the land that surrounds them, as well as stores, flats, and other structures. This tax is distinct from the tax that falls under the purview of the Income Tax Act. The income earned from such owned property is only taxed under the Income Tax Act, not the property itself. Let’s not get mixed up about two taxes because they are completely different.

Property tax is a yearly sum paid by the property/land owner to the local governing body or Municipal Corporation. The following are examples of ‘property’ that may be subject to property tax liability:

• Residential House – Self-Occupied/Let Out
• Office or factory building
• Warehouses
• Flats/Apartments
• Commercial establishments/shops

In India, who is responsible for collecting Property Tax?

As previously said, the Municipality of any given region is the one who is entitled to assess, impose, and collect the property tax on an annual or semi-annual basis.

What is the foundation for property tax calculation?

Property taxes in India are calculated on the basis of ‘Annual Value.’ After determining the area, construction, property size, kind of building, and other relevant parameters, this annual value is estimated. As a result, the value varies from property to property. Lighting, drainage, and water taxes are all included in the property tax. Let out property and self-occupied property are the two primary categories under which it is calculated.

Allowable Deductions while estimating Property Tax

Deductions allowed for calculating property taxes Interest on a loan used to build, purchase, or repair the property

For repairs and upkeep of the property, a deduction of up to 30% is allowed.

The maximum interest payable is Rs.1,50,000 (if the loan is obtained on or after April 1, 1999) and Rs.30,000 (if the loan is taken before April 1, 1999). (if loan taken is after 1st April,1999)

Exemptions from Property Tax

The following properties are not subject to the Indian Property Tax: –

• The Central Government owns a number of properties.
• Vacant property of a certain type, such as a building or a block of land;
• Religious places of worship, philanthropic institutions, educational institutions,   historical monuments, cremation grounds/graveyards, trade union offices, free   recreational buildings, and so on.
• Unauthorized structures that are not registered with the municipality.