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Riya Tayal | 02 Jan 2023

Property Tax Guide In India 2022 – Calculation, Methods & Online Payment

Property Tax Guide In India 2022 – Calculation, Methods & Online Payment

Does the dream of owning a house excite you? Well, it excites every one of us, but we usually hate the extra liability that comes along with it, right? The most significant liability that comes with buying a house is paying Property Tax every year. Unfortunately, Property Tax is not something that we as good citizens can avoid. It is the duty of every landowner to pay the Property Tax of the Commerical or Residential Building that they own. 

With the Property Tax payment dates coming soon, you as a landowner must know the rate of Property Tax 2022 along with the methods of calculation and payment. So, to make the task easier for you, we have covered all the vital information relating to Property Tax 2022 in this article. 

Let's dive in and get the best clarity of it!

What is Property Tax, and why is it important?

"Property Tax" is a combination of two words, i.e., "Property" and "Tax." Here, the word "Property" refers to all tangible real estate under the ownership of an individual and involves houses, office buildings, other such premises rented to third parties. On the other hand, the term "Tax" refers to the amount of money that an individual pays to the government so that it can offer public services.

When combined, Property tax is the amount of tax paid by the landowner to the local government or municipal corporation for the area they occupy. If we talk about the time of paying this tax, the Property Tax must be paid every year. This tax is charged by the government on all the tangible real estate assets that a person owns. These real estate assets generally involve residential houses, office buildings, premises rented out to third parties, etc. 

Property Tax in the country is to be paid on "real property" that includes land and improvements on the land. It is the duty of the municipality of the particular area to do the property assessment and determine the property tax. This tax can either be paid annually or on a semi-annual basis. The tax collected is further used by the government to develop local amenities like road repairs, maintenance of public schools and parks, etc. Remember that, Property Tax varies from one location to another and can be different in different municipalities and cities. Also, you will have to pay Property Tax even if your Residential or Commercial property is left unoccupied. However, if you have vacant plots of land, without any adjoining construction, in that case, you are not liable to pay Property Tax for that property. 

Now, coming to the importance of Property Tax, the money collected through this tax is crucial to the government. They use this tax money to maintain and offer civic amenities that we all need as citizens of India. Think of the basic things that we need to lead a healthy and comfortable life laying new roads to enhance connectivity; from laying sewer pipes to arranging for adequate streetlights, the government depends heavily on tax money, especially Property Tax. 

Also Read: Tax Implications On Home Buying

Calculation of Property Tax- How is Property Tax calculated?

The amount of Property Tax that you pay on your property varies depending on the state or region you live in! So, if you have a house in Chennai and Mumbai, and they are of the same size, you will be paying two different amounts of Property Tax. This is because the different tax collecting bodies have different ways to calculate the Property Tax you pay. All this might not seem fair to many of you; therefore, in order to bring in some consistency and transparency, here's a general guideline that tax collecting bodies use on the basis of the formula:

Property Tax 2021-22: Base Value X Built-up Area X Age of the property X Type of property/building X Category of usage X Floor factor

In the above formula, you can clearly see the factors on the basis of which your property tax value is calculated. The main factors involve the value of the land, the amount of space used for construction and the amount of open space, the property type, i.e. residential or commercial, age of the property, category of usage, i.e. self-owned or rented, and if it is a single storey or multi-storey building. 

You can use the above-stated basic formula to get an approximation of how much Property Tax you will need to pay to the government. You can even use online Property tax calculators that will free you from the hassle of calculating the tax on your own. 

Methods to calculate Property Tax

The formula stated above for Property Tax calculation is just a guideline for how Property Tax is calculated by State Governments. Apart from this, there are multiple methods used to calculate Property Tax. Let's have a look at each one of them in brief. 

1. Capital Value System

This is a relatively simple and straightforward way of Property Tax calculation. Under Capital Value System or CVS system for Property Tax calculation, the tax is calculated as a percentage of the market value of the property. The government decides the market value of the property on the basis of the property location. This method of tax calculation is generally followed in the city of Mumbai. 

Also Read: Factors To Consider When Taking A Home Loan

2. Unit Area Value System

Another method of Property Tax calculation is Unit Area Value System or UAS. Here in this method, a price per unit value of the carpet area or built-up area of the property is fixed. The property tax valuation under this method is calculated on the basis of the per-unit price of the property's built-up area. This price is decided on the basis of the expected returns of the property as per its locality, land price, and usage. 

Furthermore, this value is multiplied by the built-up area of the property in order to derive the tax valuation. A wide range of municipal authorities like Patna, Delhi, Hyderabad, Kolkata, and Bengaluru follow this method of Property Tax calculation. 

3. Annual Rental Value System 

In this method, the Property Tax is calculated and collected on the basis of the annual rentability of the property; hence it's called as Rateable Value System (RSV) also. As per the Annual Rental Value system, the Property Tax is calculated on the rental value derived from the property in a year. 

However, one thing to note here is that this need not be the actual rent amount collected from the property. Still, it is the valuation of rent determined by the municipal authority based on the condition of the property, location, and size. At the time of valuation, the proximity of the real estate property to landmarks and other amenities is also taken into consideration. Chennai and some parts of Hyderabad follow this method of Property Tax calculation. 

Payment of Property Tax- Pay Your Property Tax Online

When it comes to paying the Property Tax, the most traditional way to pay the tax is at the municipal corporation office nearest to you or the area where your property is located. In big cities and towns, some municipal corporation offices tie up with a few selected banks. These banks, in turn, are authorised to collect Property Tax on behalf of these corporations.

During the old days, when you visited a physical office to pay your Property Tax, you were required to keep your Khata Number and Property Tax Number ready. Later, you can pay the amount using cards or cash at these offices. But now, as India has transformed and progressed digitally, you can pay Property Tax online with just a few clicks. 

Paying Property tax online is fast and straightforward. The online method to pay Property Tax is more convenient and preferred as taxpayers can easily pay the tax from anywhere and at any time. So, if you are wondering about how to pay Property Tax online, we have got you covered with a simple guide below.

Step 1: Firstly, you have to go to the official website of the municipal corporation of your city. For example, Bangalore = bbmptax, Pune = pcmcindia etc. 

Step 2: Select the tab indicating Property Tax and go to the payment option.

Step 3: Choose the right form (either 4 or 5) on the basis of the category under which your property falls. These forms are used to identify if any changes have been made to the property in question.

Step 4: Now, select the assessment year. This is the year for which the Property Tax needs to be calculated and paid.

Step 5: Here, fill in the property identification number and other related details relating to your property like property type, the zone under which the property falls, owner's name, etc.

Step 6: After entering all the details, you can choose the mode of payment, which could be internet banking or credit/debit cards.

Step 7: Lastly, you can take a printout of the challan for reference when the payment is made. 

Paying Property Tax via Google Pay

As mobile wallets are gaining much more popular these days, you can even pay your Property Tax online using Google Pay. For those always on the go, using GPay to pay tax is an excellent option. For this, you just need to open the GPay app on your phone go to the "Bill Payments" option. Here, under "Categories," choose "Municipal tax/services." Now, find your correct city/municipal corporation and link your account. Lastly, fill in the requested details like property ID, mobile number, etc. Once your account is created, the process of paying Property Tax online is fast and hassle-free. 

Here we have come to an end of this guide on Property Tax 2022- Calculation, Types, and Online Payment. We hope each segment of this article will help you understand in detail what exactly Property tax is and how it is calculated and paid. In case you have any questions or doubts, feel free to ask by commenting below. We will be delighted to answer them!

Also read: An Informative and Detailed Guide to Property Valuation


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