Bought A New House? How House Tax Is Calculated And Ways To File It

Local municipal authorities collect property tax for the maintenance of civic amenities and services.

Bought A New House? How House Tax Is Calculated And Ways To File It

How house ownership tax is calculated and ways to file it

Buying a property is a highly capital-intensive process where one is required to invest large sums.

Once you become the owner of your new house, you still have to spend a significant amount on maintaining it, be it for a fresh coat of paint or waterproofing the terrace.

However, besides this, payment must be made by the owner of the house to the municipal authority or corporation of the area in the form of property tax or house tax.

What is house tax?

Local municipal authorities collect property tax to maintain civic amenities and services like parks, sewer systems, roads, and street lights, among other facilities.

The tax is levied on the owner of the property. In India, vacant plots with no adjoining construction are not taxed.

As the local authorities collect the property tax, the rate depends on states, cities and zones.

How is it calculated?

Like the rate, the method of calculating property tax differs for the various municipal authorities. There are three systems through which property tax is collected.

  • Annual Rental Value System

In this system, the property tax is calculated based on the annual rent value of the property. It does not refer to the actual rent amount collected on the property.

Instead, it is the fixed rental value decided by the municipal authority, which depends on factors like the location, size or condition of the house.

  • Capital Value System

Here, the municipal authority takes into consideration the market value of the property to calculate the tax to be levied on it.

The government decides the value of the property. It is revised annually based on the location of the property.

  • Unit Value System

This system involves levying the property tax on the per unit price of the built-up or carpet area of the property.

The price is fixed based on the expected returns from the property depending on its land price, usage, and location.

Where to file property tax?

To file your property tax, one can visit the office of the local municipal corporation in the area or banks designated by the municipality.

One has to provide the property tax number or the Khatha number to identify the property one want to pay the tax.

Owners can also pay their property tax online through the website of the respective state government or local municipality.

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