All Indian property owners have an obligation to pay property tax. The local municipal body collects this tax directly. The tax revenue supports the maintenance of roads and drainage systems, street lights, and parks, as well as other public services in the area. Property owners who reside on land, as well as flat and house residents, must pay this tax annually. 

Most people remain unclear about the property tax system, which can lead to potential legal complications in certain situations. To understand property tax, one must learn about its definition and calculation process, along with the identification of its payment responsibilities. If you are looking to invest in the Indian real estate market, you must read on, as this guide explains all the key points about property tax in India.

What is Property Tax?

Local governments require property owners to pay their yearly property tax to the municipal authority. Municipal corporations serve as the tax collection authority, whereas central and state governments do not participate in this process. Property tax rates depend on the location of the property, its dimensions, and its intended purpose.

The tax system affects properties used for residential purposes as well as commercial buildings. City-based vacant land parcels must pay tax regardless of their condition. Property owners must pay this tax to prevent legal consequences.

What is House Tax?

Property tax also goes by the name of House tax. The tax levied on residential properties and flats is called the house tax. The tax applies to residential properties and buildings utilized for living purposes and renting, as well as those used for business operations.

The local body requires all flat owners in cities such as Pune and Hyderabad to submit annual house tax payments. The tax amount for flats depends on their size and location, as well as additional elements such as age and intended use.

Why is Property Tax Important?

Local bodies are largely dependent on property tax as a source of income. This money is used by them to provide basic facilities like:

• Clean Roads
• Street Lights
• Sewage Treatment
• Garbage Disposal
• Water Supply

This income is essential to the local services. Therefore, paying this tax on time will improve the quality of life in cities.

Who Pays Property Taxes?

The property tax is paid by the person whose name is on the property records. It is not based on who uses the property. However, if the property is rented, the owner still pays the tax.

If the property is jointly owned, all the owners are responsible. However, usually, one person pays and has proof.

The tax is payable by the new owner if the property is sold and from the date of transfer. Municipal records need to be updated after every sale to avoid confusion.

How is Property Tax Calculated?

The calculation of property tax in India is not one method. Each state and city has its own method. But the main factors are:

• Location Of The Property
• Size In Square Feet
• Type Of Property (residential or commercial)
• Age Of The Building
• Occupancy Status (self-used or rented)

Here are three common methods for property tax calculation:

1. Annual Rental Value (ARV)

Cities like Hyderabad and Chennai make use of this method. The tax is based on the expected yearly rent of the property and not the actual rent.

2. Unit Area Value (UAV)

Used in Delhi and Kolkata. The basis of tax is on per square foot value multiplied by property size and usage factor.

3. Capital Value System (CVS)

Mumbai uses this method. The tax is a percentage of the market value of the property set by the government.

Property Tax Payment Cycle

Property tax is paid once or twice a year. Most municipal bodies offer both options. If paid in full early, discounts are available.

Important Points To Remember:

• Due dates vary by state and city
• Late payments attract fines or interest
• Online payment is available in most major cities

For example, in Bangalore, Bruhat Bengaluru Mahanagara Palike (BBMP) offers a 5% rebate if property tax is paid before May 30 every year.

How to Pay Property Tax in India

The process is now simple. Many cities offer online platforms to make payments. Here is a general guide:

1. Visit the municipal website
2. Select ‘Property Tax’ option
3. Enter property ID or assessment number
4. Check tax details
5. Pay using net banking, UPI, or cards
6. Download the receipt for records

Popular Municipal Websites Include:

• BBMP (Bangalore)
• MCGM (Mumbai)
• GHMC (Hyderabad)
• NDMC (Delhi)

Penalty for Not Paying Property Tax

If someone does not pay the property tax on time, the local body can:

• Add Penalty Charges
• Charge Interest (usually 1-2% per month)
• Send Legal Notices
• Seal The Property In Extreme Cases

In Chennai, for example, the penalty is 2% interest per month for delay. In Hyderabad, it is 1% per month.

Property Tax Exemptions

Some properties get full or partial exemption from property tax. This depends on local rules. Common exemptions include:

• Government Buildings
• Places Of Worship
• Agricultural Land
• Properties Owned By Freedom Fighters Or War Widows
• Vacant Land In Some Areas

Senior citizens and disabled persons may also get discounts in a few states. It is best to check with the local municipal office for exact details.

Property Tax Rates in Top Indian Cities

Note: These rates are indicative. Actual rates may differ based on zones.

Important Stats About Property Tax in India

• The collection of property taxes by Indian urban local bodies increased by 31% between the current fiscal year and the previous one.
• The Ministry of Housing and Urban Affairs received reports from 4,771 urban local bodies, which showed that 70% of them managed to increase their property tax revenue in 2022–23 compared to the previous year.
• During the fiscal year 2022–23, the Bruhat Bengaluru Mahanagara Palike (BBMP) collected ₹2,397 crore in property taxes while missing its ₹3,520 crore target.
• Mumbai's property tax revenue reached ₹4,856 crore during 2023–24 despite its set target of ₹6,000 crore.
• BBMP established a new property tax collection benchmark in 2024–25 when it received ₹4,284 crore, which exceeded the previous year's total of ₹2,300 crore.
• The Ludhiana Municipal Corporation reached its all-time high property tax collection total of ₹133.09 crore before March 6, 2024.

Common Mistakes to Avoid

• Not updating ownership after property purchase
• Ignoring the tax due date
• Paying the wrong amount due to outdated property data
• Not keeping the receipt of payment
• Entering wrong property details while paying online

Conclusion

Buying a home is not only a dream but a big investment. Without help, it can be stressful to handle tasks such as property tax. This is where Full Basket Property comes in. Apart from helping you find your perfect home, we also help you with all steps, including home loans and documentation. 

Our team works with you until you take full command of your house. Our professionals offer expert support and trusted service from property search to final registration.

Visit www.fullbasketproperty.com to make your home-buying journey easier and safer. Your next home should be accompanied by peace of mind and complete support.

For any further information or queries, write to us by filling the contact form in the website, or contact here at 9019000400, directly to our 24x7 available marketing team at your service. To know more about safe property buying and get full support, visit us today.