Property Tax is an ad valorem tax, payable by a property owner on the value of his property. It is dependent on many factors like location, state property laws and the current value of the property at the time of computation. It is charged by the respective municipal authorities of the area in which the taxable property is located.
Income that attract Property Tax:
The income generated from property/house falls under the tax net as per provisions of the Income Tax Act, 1961. The property tax that is chargeable on the income is dependent on the respective municipal corporations of each state. The property tax is payable on income from the following properties:
- Residential property/house in use: These include flats, apartments, or single owned houses
- Commercial/Industrial building that is in use: These include office space, factory and/or store house
Components of Property Tax:
Property Tax serves to be a significant contributor to the local
revenues that finds further use in improving civic amenities.
But in India, the property tax laws are not followed sincerely
by a majority of the population. The main components of property
tax that form the basis of the revenue are the tax base
and the tax rate.
The computation of property tax in Indian cities is done in various ways, the primary way being the Annual Rental Value (ARV) of the property. The ARV is the gross annual rent that is expected to be accrued on a yearly basis. Other ways of computing property tax are 'Capital Value of Property' and 'Site Value of Property'.
Some State Governments have also introduced "Self Assessment Schemes" where
residents can declare their property tax via a standardized
property tax payment form.
Anyone who has bought a property is liable to pay the due taxes. The properties and its related transactions that invite taxes are:
- Persons who have entered into a transfer of property.
- Persons who have received property in accordance with the provisions of Transfer of Property Act, 1882.
- Owners of a Real Estate property (plot/home/office space etc.)
- Persons who have entered into a Lease Agreement.
Exemptions from Income Tax:
Under the Income Tax Act, 1961 the following components do not come within the ambit of Income Tax::
House Rent Allowance: Salaried person, if they spend the amount in paying house rent are allowed IT exemption.
Housing Loan Exemption: Tax payers, if they use the amount in construction of own house residence, are allowed exemption on EMIs.
Depreciation of Real Estate: As the capital gains tax is variable as per the depreciation, a Real Estate owner is exempted under the 'Depreciation Re-Capture Scheme' applicable in your locality.
Find out more on how much you have to pay and how much you can save and
when is the best time to buy/sell. We at IndianRealtyLaws.Com focus on providing information to guide you through the complexities of property tax.
Related Acts
Income Tax, 1961