It is a dream for many of us to own a house or property, but we hate all the extra liability that comes along with it, the biggest one being calculating and paying property tax every year. With the tax payment dates coming soon, you should know that the rate of property tax 2022 follows the schedule as set by the budget of 2021-2022.
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Property tax is sadly not something that we as good citizens can avoid; it is our duty to pay property tax on the residential and commercial property we own. This article will tell you what property tax is, how to calculate property tax, why it is important and also how to calculate the tax and how to pay property tax online.
What is Property Tax?
Property tax is the fee you pay on property you own, determined by the local government and based on various factors. It’s not a one-time payment but a recurring obligation, usually yearly or semi-annually. Property tax applies to real estate, including buildings and land attached to them, whether residential or commercial, occupied or vacant. Vacant land without any construction is typically exempt from this tax.
Why is Property Tax Important?
The money collected through property tax is very important to the government, they use this money to maintain and provide civic amenities that we as citizens need. Think of the basic things we require to lead a comfortable and healthy life like laying new roads to improve connectivity and conducting road repairs, from laying sewer pipes to repairing sewer system, from arranging for adequate streetlights and safety measures to maintaining common areas such as parks and so on, the government depends heavily on the taxes that we pay, especially property tax.
Who Pays Property Tax to the Government?
There are a lot of individuals who feel that because they are not utilizing their property themselves, that they should not have to pay property tax. They feel that the tenant or the person who is directly benefiting from the property should be responsible to pay property tax. However, in reality, this is not the case.
Read: Property Rights of the Second Wife and First Wife Explained in Detail
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According to the law, the owner of the property is the person who is held responsible for paying property tax. Tenants will not be held accountable if property tax is not paid, the onus to pay the tax is on the owner of the property alone.
How to Calculate Property Tax?
The good news is that the amount of tax you have to pay on your property will vary from state to state and region to region. So, if you have a house in Mumbai and a house in Chennai, and they are of the same size, you will be paying two very different amounts as property tax for each house.
This is because different tax collecting bodies have different ways to decide the property tax you pay. When you think of it, the whole thing might not seem fair, so to bring in some transparency and consistency there is a general guideline that all tax collecting bodies use, this is based on the formula –
Property tax 2021-2022 = Base value x built up area x age of the property x type of property/building x category of usage x floor factor.
In this formula, you can clearly see the factors based on which your property tax value is calculated. The main factor are the value of the land, the amount of space that is used for construction and the amount of open space, the age of the property, the property type (commercial or residential), the category of usage i.e. self-owned or rented, and if it is a single storey building or a multi-storey building.
You can use this basic formula to get a rough estimate of how much property tax you will need to pay. Or if you’re wondering how to calculate property tax online, don’t worry, there are plenty of property tax calculators that you can use. There are also property tax online calculators that are present on the online portals for each state.
The Methods used to Calculate Property Tax
The above formula is just a guideline as to how state governments calculate how much property tax you should pay. Along with these, there are different methods used to calculate property tax such as–
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Capital Value Systems
This is a fairly straightforward way of property tax calculation; in this method, the market value of your property is used as the basis on which property tax is levied. The value of the property is fixed by the government based on the location of your property, and this rate is revised by them annually. Once a value is assigned to your property, you will pay a percentage of that as property tax.
Unit Area Value System
Here in this method, a price per unit value of the built-up area or carpet area of the property is fixed. This per-unit price is based on things like land price, usage of the property, and location and expected returns. Once this number is arrived at, you will have to multiply it into the built-up area of your property. In cities like Bengaluru, New Delhi, Kolkata, Ahmedabad, Hyderabad and Patna, this method is favoured.
Annual Rental Value System
In this method property tax is calculated and collected based on the annual ‘rentability’ of your property, hence it is also called the rateable value system. The municipal body will estimate a rental value based on the location, amenities, size of the property, distance to landmarks etc. It is not based on how much rent the owner actually collects annually but on the capacity of gross annual rent that it can bring. Cities like Chennai and Hyderabad follow this system.
Read: A Comprehensive Guide to E Stamp and E Stamping Process
The different Methods Available to Pay Property Tax
The most traditional way to pay your property tax is at the municipal corporation office closest to you i.e. in the area where your property is located. In larger cities and towns a few municipal corporation offices tie-up with a select few banks and these banks are authorized to collect property tax on behalf of these corporations.
When you visit a physical office to make your property tax payments, you will need to keep your ‘property tax number’ or ‘Khatha number’ ready. You can pay the amount using cash or cards at these offices.
Read: Property Tax Hyderabad – How to Pay Property Tax Online in Hyderabad
As India has progressed, now you can easily pay your property tax online. The property tax online payment option is more preferred as you can do it from anywhere and at any time. This is a much more flexible and convenient way to pay your property tax.
How to Pay Property Tax Online
Paying your property tax online is simple, fast, and can be done from anywhere and at any time. You can access the websites through your phone, home PC or laptop.
The first step is to go to the site of the municipal corporation of your city (Bangalore = bbmptax, Pune = pcmcindia etc.)
Once you’re on the right page, enter the details required such as name, assessment code/application number etc. Once you have entered the key details the process is seamless, you get to choose how to pay your property tax online using your debit/credit card or through the banks that are supported on the portal.
Now, you can even pay your property tax online using Google Pay. For those always on the go, this is a great option and can do it on the app on your phone. Here’s how you pay your property tax for 2021-2022 on Google Pay –
- Open the app
- Go to Bill Payments
- Under ‘Categories’ choose Municipal tax/ services
- Find your correct city/municipal corporation
- Link your account
- Fill in the requested details like property ID, mobile number, etc.
Once your account is created, the process of paying is fast and without any complications.
Exemptions and Concessions that are Available When you Pay Property Tax 2021-2022
Although we all have to pay property tax, there are a few exceptions to the rule. The government has made a list of people and types of properties that are exempt from paying property tax, such as–
- Any building/plot that has been occupied for a specific purpose like worship, burial, heritage, etc.
- Any property that is used for charity purposes.
- Any property or building that is used for agricultural purposes is exempt, excluding property that is used as a dwelling.
- Property with its interest vested in a corporation, here the corporation is charged the primary tax.
- Property owned and self-occupied by a war widow, a winner of gallantry award.
Read: No HRA? Know What Section 80GG of the Income Tax Act Means for You.
Concessions and rebates are provided for –
A concession of 30% is allowed for women, senior citizens and those who are physically challenged.
Rebates 2021-2022 –
- A 30% rebate is allotted for ex-servicemen.
- A 20% rebate is allotted for group housing flats for a specific time in a financial year.
These concessions are only if a property is self-occupied and used for residential purposes.
Fines and Penalties for Late Payment of Property Tax
There is no way that one can completely escape from paying your property tax (apart from those who are exempted). This is why you should not try to avoid paying these taxes. If you pay your property tax late, then you are liable to pay a fine for late payment.
The fine you will pay is generally calculated based on a certain percentage of the amount due. This interest rate varies from state to state, some states have no fines while others charge anywhere from 5% to 20%.
Not sure how to pay your property tax? Just comment below and we can help you through the process.
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FAQ’s
FAQ 1: What is property tax, and who is responsible for paying it?
Answer: Property tax is a tax imposed on property ownership, including land and any improvements like buildings. Both individuals and organizations who own property are responsible for paying it.
FAQ 2: How is the property tax amount determined?
Answer: The property tax amount is set by the local government or municipal corporation and is calculated based on several factors, including the property’s value, size, location, and usage.
FAQ 3: Is property tax a one-time payment, and when do I need to pay it?
Answer: Property tax is not a one-time payment; it is usually paid annually or semi-annually to the local government or municipal authority. The specific payment schedule may vary by location.
FAQ 4: Are all types of properties subject to property tax?
Answer: Property tax generally applies to all types of real estate, including residential and commercial properties, whether occupied, rented out, or left unoccupied. However, vacant plots of land without any adjoining construction are often exempt.
FAQ 5: Can I be exempt from property tax for certain reasons?
Answer: You may be exempt from property tax for vacant land without any buildings, but exemptions vary by location and local tax regulations. It’s essential to check with your local government or municipal authority for specific eligibility criteria.
