Buyers do not just pay one single amount on buying a property. They also have to make regular and consistent payments for the maintenance of ownership on the property. These small payments are a direct tax that is known as property tax. In short, people who own homes pay property tax. The property tax payment is mandatory and is imposed on ownership of property. The payments are used for the maintenance of civic bodies and as an income for development. The owners of immovable properties have to pay tax annually in India.
What Is Property Tax?
Do homebuyers need to understand what is property tax in India? Without having enough knowledge about property tax details, it will become difficult to determine how much property tax you need to pay. The tax on property is paid by the landowner to the local authority i.e. the municipal corporation. Land property tax consists of all real estate properties like an office building, individual’s house, and rented property. The property tax in India is payable on the real property whether land with or without any man-made structure. The different types of properties are evaluated by the city’s municipal corporation on the property tax depends on its value.
Property Tax- meaning and understanding
The money collected from the payment of land tax is crucial for the government. The tax money helps in maintaining and establishing basic amenities like installing sewage pipes, laying roads, maintenance of parks, construction, installing street lights, etc. The government heavily relies on the collection of property tax for providing the citizens with basic civic and public amenities.
What is holding tax?
Withholding tax is known as retention tax and the taxpayer is obligated to withhold tax during the payment of rent, commission, or for any professional services at specific rates.
How do you calculate property tax?
The property tax rate may vary from city to city. Other factors also determine the tax amount such as:
- Property location.
- Property size.
- Ready-to-move property or under-construction property.
- Property owner’s gender (discounts available for female owners).
- Property owner’s age (discounts available for senior citizens).
- Civic facilities are also provided by a local authority.
Why do we have to pay property tax?
The local authority provides many important services such as the cleanliness of locality, water supply, drainage system, local roads maintenance, and other public or civil facilities. The payment of land tax helps in getting revenue and funding of all the civic services that the local authority provides. If you fail to clear your property tax bill payment then the local or municipal body can deny you water supply and other services. It can even initiate legal action against the landowner for recovering the amount due to be paid.
Real Estate Tax
The real estate tax is used for various purposes within the community like:
- Infrastructure items such as water, sewers, and roads.
- Public services such as fire, police, garbage collection, and EMS.
- Public school systems.
Corporation taxes
Corporation property tax is charged on a corporate body that consists of any limited companies. Under the corporation property tax, the limited company can be an SPV property or any other type of company whose activities are property trading or property development.
Commercial Property Taxes
The commercial property tax is one of the biggest expenses for many owners of corporate or commercial real estate throughout the world. This type of tax can never be fully paid, and thus, keeps on going forever. The government calculates a specific value once a year and gets money for the owners of these commercial properties unless the company requests an appeal. It is a wealth tax and is mandatory to be paid.
Residential Property Taxes
The residential property taxes are the amount to be paid by the owners of house property to the local authority or Municipal Corporation of the locality. The residential property taxes must be cleared every year. Any property, residential homes, and office buildings that are given on rent to third parties are called real estate assets.
Property tax status check
Whether you want to home tax payment or get a refund, you can check the property tax status/ house tax status by using:
- Where’s my Refund tool IRS.
- Calling at 1-800-829-1040 IRS.
- View your IRS account details.
- Check the status updates or emails from the software or e-filling website.
The formula for property tax computation
There is a specific method for calculating property tax across the country. The method used for this purpose is as follows:
Property Tax = Value of base x Built-Up Area x Property age x Type of Property x Usage Category x Floor Factor.
Due date and penalty
The Income Tax Act of India lays down penalties levied for various defaults made by the taxpayer. Some of them are mandatory while some lie at the tax authority’s discretion. Section 220 (1) of the IT Act of India explains the penalty on non-payment of taxes. As per the provision, the taxpayer must clear the payment within 30 days of receiving the notice. Local authorities of different cities impose penalties on non-payment and delay of property taxes. A monthly penalty of about 1-2% is levied on the taxpayer.
Steps for payment of property tax
A taxpayer does not require any other documents except the house property bill that is delivered to the registered address. The tax bill has all the relevant details required to make an online payment. You can also check the official website of the specific locality to know the details of property tax ap.
Let us look at the steps of tax on property:
Step 1: You will have to visit the municipality’s official website i.e. e property tax. Every municipality has their official website.
Step 2: You must find the tax payment option. Select whether the payment is to be made for commercial or residential property.
Step 3: You will have to fill in the revenue survey number, property tax number, or Khatha number.
Then choose the assessment year, you are making the payment for.
Step 4: Verify the details entered such as assessment year, property tax number and other personal details like total area, name, usage type and more. Accurate details must be entered to avoid errors.
Step 5: Choose the payment method. You can make payments through Credit, Debit, or Internet Banking. The payment portal will open where you can complete the property tax payment.
Step 6: After successfully paying the house tax, you will get a receipt or challan confirming the payment. You must keep a hard copy of the receipt/challan for future reference.
Property tax exemptions
Though the rules of property tax are different in different cities, certain types of landowners enjoy some rebates on the house tax liability as a whole. Across the country, properties being used by governments and religious organizations are free of property tax. Property exemption is given to:
- Senior citizens.
- People having disabilities.
- Former navy, army, or any defense personnel employed.
- Martyrs’ families from the BSF, Indian Army, CRPF, police service, and fire brigade.
- Agricultural properties.
- Educational institutes.
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Frequently Asked Questions (FAQ)
How do I find my local property tax?
You must visit the municipality website of your locality or physically go to a property tax office to know about the local property tax.
Which city in Canada has the highest property taxes?
As per the latest findings, Grand Prairie charges the highest property tax in Canada.
Are property taxes state or local?
Every property is taxable and the property tax payment must be done annually to the local government. The property tax can be paid to the Municipal Corporation or local state government, as per the government policies.
Which city has the highest property taxes in India?
Mumbai has the highest property tax in India.
What if I will not pay property tax?
If you fail to make a timely property tax payment then the local authority can start charging interest on the total tax amount. You may also have to pay monetary penalties which means the total tax amount will keep increasing with time.
What happens if property tax is not paid in India?
If you file late tax returns then you are sure to attract a penalty of over Rs. 5,000 on the tax amount payable.
Is property tax exempted from income tax in India?
The property tax exemption is laid down in Section 220 (1) under the Income Tax Act of India. These exemptions are given to people who have children or dependents. There are also tax exemptions for NRIs, non-citizens, institutions, funds etc.
How do I find out property taxes in my area?
The land tax levied is found on the municipality website or local tax assessor. Every municipality has a tax website of their own. There are different exemptions and deduction percentages given to taxpayers across the cities. The best way to find the tax payment rate of a specific area is by visiting the official tax payment website of the municipality.
