Are you planning to purchase a property with the help of a home loan? Then, you need to account for an important expense you will incur after you’ve purchased the property – the property tax. This tax is an annual payment that the property owner needs to make to the municipal corporation of their area or equivalent local government authorities. The property tax is applicable not just on your home but also on other tangible real estate such as office building and any property given for rent.
Why is property tax levied?
Like every other tax, property tax is also a source of income for government bodies. This tax is mainly used towards the development of the town or city. This includes construction and maintenance of roads, water supply systems, electrical grids, parks, sewer systems, and more.
How to calculate property tax?
The method for calculating property tax may differ among municipalities, but the general formula is as follows –
Property Tax = Base value x Property Built-up Area x Usage Category x Age Factor x Building Type x Floor Factor
Besides the general formula, different municipalities may use different methods of calculation, including –
- Capital Value System (CVS) under which the tax is calculated as a percentage of the property’s total market value.
- Unit Area Value System (UAS) under which the property tax is calculated on the basis of the unit price of the built-up area of the building.
- Annual Rental Value System (RVS) under which the tax is calculated upon the yearly rental value of the property.
Additional Read: What Is Property Tax and How It Can Be Calculated
How to pay property tax online?
The first thing you need to do is check whether your municipality allows online payment of property tax. However, the general steps to paying property tax online include –
- Visit the official website of your local municipal body.
- You need to log in with your credentials. If you do not have an account yet, register with the portal and then log in.
- Go to the ‘Property Tax’ tab and click on it.
- Choose the type of property and the year of assessment.
- Enter other details such as the name of the owner, property identification number, and other relevant information.
- Check the amount for your property, choose a suitable payment mode, and make the payment.
- Download and print the challan for reference.
What happens if you fail to pay property tax on time?
If you fail to pay the property tax on time, you may be charged a late fee as a penalty. And if you do not pay your property tax altogether, you risk losing your property to a foreclosure or tax sale. But if you’ve taken housing loan to buy the property, certain exemptions are available on the interest paid. This is especially useful if the home loan interest rates are high.
Additional Read: Why Paying Home Loan EMI is Better Than a Home on Rent?
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