A tax levied by the local government on a property, commercial or residential, is known as a property tax. In India, the property tax is paid to the municipal authority under whose jurisdiction the property falls. The tax to be levied on a property is assessed for valuation against the market value to generate the property tax rate. Therefore, the tax on your property can vary vastly from the tax on your neighbour’s property.
A property tax is the primary source of capital for the local bodies; it is used to maintain civic amenities like roads, hospitals, parks etc. When you pay this tax, you ensure that your surroundings are maintained properly. Thus, it is important to pay this tax and be a responsible citizen.
Here are some methods you can use to estimate your property tax.
Know your property type
All properties are classified based on the purpose they serve, and the property tax is levied accordingly. A property can be classified as residential, commercial, or as a land under construction. The local municipal authorities take this classification into account while performing the valuation for determining the property tax rate. You can benefit from the various tax concessions available if you know the type of property you own.
Location of the property
Every region has a unique property tax rate based purely on the maintenance needs. Ensure that you know the property tax rate of the local municipal authority and how it is calculated. The methods of valuation used for your property depend directly on the method employed by the civic body. You can use the property tax calculator available on the website of your municipal corporation to calculate the property tax you will have to pay.
Provisions on home loans
If you made a purchase using a home loan, you are eligible for certain tax deductions. While you make your home loan repayment, you can avail some exemption on your property tax. Under section 24 of the Income Tax Act, there is an exemption of up to Rs. 2 lakhs on loan taken for buying a house occupied by you. For those of you who own the property but do not reside in it, you are also eligible to get an exemption on your entire interest. Keep in mind these provisions to get the most tax benefits when you pay the property tax.
For first time buyers
When you buy a property for the first time, you pay a stamp duty on property. You can claim assured deductions under section 80C for the registration charges and the stamp duty on property which amount to a maximum deduction of up to Rs. 1.5 lakhs. Along with these concessions, you can also avail tax benefits on any expenditure that you may have incurred during the move-in if the property is newly constructed.
A property tax is determined largely by the local government body. However, as a taxpayer, you should make yourself aware of all the tax provisions you are eligible for. This will allow you to reduce any tax liability. If you are looking to purchase a property, you can check out Tata Capital’s attractive home loan rates. With interest rates starting at just 9.25%, you can get a housing loan plan to make your dream purchase. Visit our website to learn more.