Everything About Property Tax You Must Know


What is Property Tax?


Property tax is a type of amount that must be paid by the landowner to the municipal corporation of your area or the local government for yours. The tax must be paid every year. the government charges Property tax on all definite real estate/property that you own. These real estate assets can be such as residential homes, office buildings, or rented-out houses to third parties. However, there is a lot to know about property tax such as its types and paying ways. Property tax is explained well below. Read on !!


Types of Property


There are four types of properties in India. Classification of property simplifies the process for the government to estimate tax based on specific criteria. The different property classifications of the property are mentioned below. 


Existing in the most primary form without any construction or modification. 

Changes made in property

This contains unmovable manmade outputs like buildings and godowns. 

Personal property

This compromises movable manmade things like cars, bicycles, trains, or buses. 

Intangible property


How to Pay Property Tax Online


There were some days long ago when it was a tedious job to pay property tax. However, now it's been quite easy to pay property tax. Most municipal corporations provide ways of paying property tax online, which helps to save you valuable time and eliminates the external time taking process.


Steps to Pay Property Tax Online


Below are the steps expressed in detail to pay property tax online.

  • Firstly, you have to log in to the official website of their near municipality/city corporation. 
  • Then select the tab denoting the property tax and steer to the payment option. 
  • After this step, choose the right form (either 4 or 5), on the basis of the category under which your property falls. These forms are to specify (The changes that have been made to a property in question). 
  • Then select the assessment year (The year for which property tax needs to be calculated and paid). Most corporations provide an option to clear backlogs in property tax payments. 
  • You would be asked then to fill in your property identification number or another relevant document related to your property including the owner's name. 
  • When you entered the appropriate details then you are required to select the mode of payment among credit/debit cards or internet banking. 
  • After the successful payment, you can have a printout of the challan for reference.


The steps mentioned above are basically drawn from the various online property tax-paying portal. Somewhere these steps can vary based on your city/town corporation.


Steps to Pay Property Tax Offline


There are still some people who are in the form of skepticism when it comes to paying property tax online. They prefer doing so offline instead of going with the online method. We have expressed below a few steps for paying property tax offline in India. Read on those-   


  • The initial step is to visit the nearest municipal corporation office located in your colony/area. 
  • After this, you need to fill out a form instructing you to pay property tax. Fill out all the essential details pertaining to property-related. 
  • After doing all of this, make the required payment of the property tax to one of the authorized officers with your preferred mode of payment and here you are done.


Calculate Property Tax


The Defined formula calculation of Property is as followed.


Property tax = Built-up Area × Base Value × Time Duration of property × Type of Building × Category of Use × Available Floor. 


The amount of tax payable depends on where the location of the property, as taxes, differ from one state to another. 


All civic corporations utilize various techniques to evaluate the tax. However, late payment of the property tax is liable for the additional charges as a fine, which can differ from one state to another. The calculation of property tax is involved many factors like the location of the property, built-up area, and usage in India. Different civic corporations use various ways to calculate tax, but at last, a general outline of these calculations stays the same.


Property assessment is assessed based on the area of its location, occupancy status (whether it is self-occupied or rented out), the purpose of the property (residential, commercial, or land), provided luxuries, built-up time, construction type such as the multi-storied or single floor, etc. After determining all these factors, the civic agency can use the above-mentioned formula to calculate tax. 


The tax on a property will be distinctive on the basis of the factors expressed above and can be easily calculated online via the official website of the municipal corporation concerned.


Different ways to Calculate the Property Tax


Ever questioned self that how the property tax is computed in India or what are factors considered in the calculation of the property tax? If yours is yes, read on- 


The calculation of the property tax is not the same in every state of India. These are different from state to state. The tax calculation of property is taken into consideration with many factors like the type of property, location of your property, occupancy status (self-occupied/rented), floor and carpet area, floor number constructed, etc. The following are methods to calculate the property tax.


Unit Area Value System (UAS): This is one of the three methods to calculate property tax. In this method, the tax valuation as per the unit area value system (UAS) is computed based on the per unit price of the built-up area of the property. 

This price is decided based on the expected returns of the property according to the location, used for, and price of land. This value is then multiplied by the property built-up area to fetch the total tax valuation. There are some municipal authorities that follow this method such as Delhi, Hyderabad, Patna, Bengaluru, and Kolkata.


Capital Value System (CVS): This method is used by the city of Mumbai. As per the Capital Value System (CVS), the property tax is computed as a percentage of the market value of the property. The market value of the property is based on the decision made by the government on the basis of the vicinity of the property.


Annual Rental Value System or Ratable Value System (RVS): This is the third method for the calculation of property tax used by Chennai and parts of Hyderabad.

Under (RVS) system, the tax is computed on the basis of the rental value generated from the property in a year. This is not compulsory to be the actual rent that is accumulated from the property. 

Therefore, it is the valuation of the rent which is determined by the municipal authority and is derived on the basis of the size, location, and condition of the property state. 


Interest in Property Tax 

There is a percentage of interest defined on late payments. Making a late payment towards property tax can get fined as per the prescribed rules, typically equal to a specific percentage of the amount due. This interest rate can be distinct from one state to another. Some states do not charge interest at all but on the other hand, others charge rates from 5% to 20%, relying on their individual policies.


Computation of Income from House Property

Sometimes it's so tough to calculate the income of a house but to make it simple and easy, we have mentioned specific things below that should be kept in mind.


  • The first thing is that the net annual value of your house is taken into the consideration to levy the tax. You can get the when you deduct the amount paid to the municipal taxes on the property from the net annual value. For instance, if you are getting a rent annually income of Rs.1.6 lakh on a house you have let out, and you are paying Rs.30,000 as municipal taxes, then the gross annual value of your house will be Rs.1.3 lakh, from which you will have to pay tax.


  • If your house is vacant and not providing you any income, but you are paying taxes to the municipal, then you can compensate this loss against income from other sources such as from your salary/rent or any other property during the same fiscal year.


  • In case the house is vacant for any period in the financial year due to the lack of residents/tenants, then you are required to consider only the income obtained as rent instead of computing it against all 12 months. For instance, if a house produces Rs.17,000 as rent but it is vacant for 4 months of the fiscal year, then the gross value of the house will be Rs.1,36,000 (Rs.17,000 * 8). Hence, the tax payable on this income will be computed after deducting the tax amount paid to the municipal and the standard deduction of 30%.


Does the Government decide property tax? 

No. Property tax is defined by your local administration that is, urban local bodies such as Municipal Corporations.


As a tenant should I pay the property tax? Is that legal? 

No. Tenants are liable in some countries to pay property tax but in our country India, the house owner has to pay the property tax. So your owner can not force you to pay property tax.


Can everyone make property tax payments online? 

Yes. But this totally depends on your municipal authority whether they provide an online mode of payment of property tax or not. 


Is municipal tax and property tax the same? 

No. municipal tax and property tax are two different taxes that you will pay. However, property tax is a type of municipal tax charged by the municipal corporation.