A Complete Guide For Property Tax Before Investing
When you buy a property, you need to pay a certain amount as property tax. You will have to shell out this amount irrespective of whether your property is unoccupied, rented or self-occupied.
If you fail to pay this tax, the Government has the right to seize your property. Read on to know the nitty-gritty of property tax and how to pay it.
# Calculation of property tax
You need to pay this tax to the municipality under whose jurisdiction your property falls. For instance, for Celebrity Natures Habitat or any other property in Bangalore, you need to pay this tax to the Bruhat Bengaluru Mahanagara Palike (BBMP).
There are three systems through which municipal corporations compute property tax, first – annual rental value system, second – capital value-based system and third one – unit area value system.
If we talk about annual rental value system, then capacity of the property to generate rent is taken into account that defined.
When we come to capital value-based system, in which municipalities consider the property’s market value and under the unit area (given area) value system, lastly for unit of the property’s built-up area is considered. They are with more information:
- Annual rental value system
This system considers the annual rentability of a property. Note that this system doesn’t take into account the actual rent collected on the property, but its ability to gross annual rent.
While determining the annual rental value various factors such as the property’s size, location and amenities are considered.
- Capital value-based system
This system takes into account the property’s market value. The market value of a property is determined by the government and is revised annually as per the ward where the property is located.
- Unit area value system
Under this system, price per unit of the property’s built-up area or carpet area is fixed and based on it the future returns are calculated.
This system of computing property tax is mostly used by the municipalities of cities like Bangalore, Kolkata, and New Delhi among others.
Payment mode
You can either pay your property tax online or offline. In the offline mode, you need to visit the municipality’s office with the essential documents such as the occupancy certificate, approved plan, building completion certificate, and sale deed.
After assessing these documents, the authorities would tell you about the tax amount. Some municipalities also have tie-ups with banks where you can pay the applicable tax.
Today, most municipalities and state governments have made online provision whereby you can pay the applicable tax directly through Internet banking or debit or credit card.
Also Read – 5 Simple Tips to Save on for Home Down Payment!
Important things to note
It’s essential to note that the onus of paying property tax lies on you, the owner of the property, and not its occupant.
Late payment attracts a penalty and interest on the due amount. Some municipalities in the country can provide an exemption based on the owner’s age, net income and location.
For instance, for senior citizens and properties located in famine-affected areas, there can be some consideration.
The property tax collected by the Government is used for providing and maintaining various civic amenities such as parks, roads, and lighting, among others.
Category: Investment Planning
