June 30, 2014

Understanding Property Tax

Owning a house is a dream come true for many people. But with the ownership, comes the responsibility of paying tax on it, which is called a house tax or a property tax. In other words, a property tax is a tax levied on property that the owner is required to pay. This tax is levied by governing authority of the jurisdiction in which the property is located. The property tax may be paid to the National Government, a State or a Municipality. Also, multiple jurisdictions may impose tax on the same property. In lieu of the normal property tax, a ‘service charge’ is permissible too. The normal property tax is coupled up with a number of other taxes; for example, water tax, drainage tax and conservancy tax.



Understanding Property Tax

This property tax or house tax is a local tax imposed on buildings, along with appurtenant land, and has to be paid by the owners. Authority to collect property tax is given to the states that in turn identify the valuation method, the slab rates applicable and the collection procedure.    

Exemption from property tax

Property tax can be exempted for the given reasons:

*      Land, which is not occupied
*      Property that belongs to the Central government
*      Property which is under a foreign mission
*      Rural property  that come under the Panchayats, the rate structure is flat in this case

*      But, in urban areas that come under the municipal jurisdiction, it is a bit progressive with almost 80% of assessments falling within the first two slabs.

Calculation of property tax

The value of the property is the base for calculation of tax on it. Some of the governing authority calculates the tax not just based on the size, but also the location, covered area and quality of construction. The money thus collected is used to maintain the infrastructure like construction and repairing of roads, cleaning of sewer system, maintenance of parks, etc.

Steps for calculation of property tax

Here are the steps to calculate the property tax:

Step 1>> Find out the assessed value of buildings and lands owned.. This estimated value of the property can be calculated by the official tax assessor. 

Step 2>> Next, verify the estimated property tax rates for the upcoming year.
The preceding years’ tax rates and their variations will also come in handy for the calculation of property tax.  

Step 3>> Deduct or subtract any property tax exemption that qualify, from the total assessed value of the property. Before completing this step, one has to consult the tax officer as the deductions differ from state to state. In majority of the cases, deductions on property tax are granted to disabled persons, widows and senior citizens.

Step 4>> Lastly, multiply the amount that you get after the deductions (if any) with the property tax rate for the approaching year. In order to know the total projected amount that you have to pay as property tax, you need to add up the amounts calculated for each taxing district.
The tax figure obtained here may vary from the actual amount as the official tax rates are determined at the end of the fiscal year. It is always important to keep a higher budget then the estimated amount.

New update

Property Tax


After a thorough research, it has been found that a considerable number of properties are not included while calculating property tax. Also, the one which are included are not accurately assessed and thus the deficit in collection. To eradicate all these issues across India, the eGov Property Tax system is introduced. In eGov, there are 3 ways in which Property Tax is calculated:

*      ARV – Annual Rental Value
*      CVS – Capital Value System
*      UAS – Unit Area System

Any of the above methods are used to derive the property tax. After the launch of eGov tool, the whole system that manages properties and their taxation is entirely computerized. It handles the registration of a new property, transfer, amalgamation and winding of any property.  

Features of eGov Property

Following are the features of eGov:

*      Accurate and complete data base
*      User friendly, pay anywhere system
*      Offers online payment by credit card
*      Provides report at city, ward and street levels
*      Improves tax compliance and hence the total collection  

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