Property tax, also known as municipal or house tax, is assessed, imposed and collected from property owners by the relevant municipal authority. The tax collected is used for maintenance and upkeep of local civic amenities, such as footpaths, roads, sewage system, parks, streetlights and others.
Not paying property tax on time can result in legal problems at later stages. We tell you what the tax rate is and why it’s important to pay it.
Who needs to pay?
Anyone who owns a property—apartment, commercial space or land—needs to pay some money to the government authorities in the form of property tax to avail of basic civic facilities available in and around the property.
However, certain categories of properties or owners are exempt from paying tax or are required to pay at a lower rate compared to others. For instance, typically, agriculture land or property used for worship are exempt from paying this tax. Similarly, there is a rebate for property owners who are senior citizens, women, disabled or ex-serviceman, among others. Therefore, do check the rate and the rules to assess your tax liability carefully.
The tax rate
Property tax is calculated based on various factors such as the locality, size, type and age of the property, its usage, the covered area, owner profile (age, gender, occupation or income) and so on.
Typically, it is calculated as a percentage of the annual rental value, capital value, or unit area value of the property. However, different municipal authorities follow different methods to evaluate a property. For instance, the Municipal Corporation of Delhi (MCD) has adopted the unit area system to calculate tax. The unit area value for eight categories (A to H) of colonies in Delhi ranges from ₹100 (for H category) to ₹630 (for A category) per sq.m of the property.
The tax rate may vary even within a city if there are multiple municipal authorities. For instance, under MCD, there are three municipal corporations—south, north and east Delhi corporations. Then there is the New Delhi Municipal Council area to take care of the territory known as Lutyens’ Delhi. The rates range from 6% to 20% of the property value.
You can calculate your property tax liability through calculators that are, typically, available on the municipal authority’s website.
How to pay
Property tax needs to be paid annually; some municipal authorities also allow paying it semi-annually.
You can pay your property tax offline at the respective municipal office of your area or at the designated bank branches. You can also pay it online through website of the municipal authority. In order to pay, you need to have various details of the property you own like the property tax number, house number, type of property, complete address, bank details and so on.
Why you should pay
Remember that the property tax adds to the municipal funds, out of which salaries of municipal workers, such as those who sweep the road or maintain the sewage system of the area, are paid out.
Moreover, there’s a penalty for late payment or default. You will have to pay a fine in the form of penal interest on the amount due. The rate depends on the respective authority. For instance, MCD charges 1% on the amount due per month, while Bruhat Bengaluru Mahanagara Palike charges penal interest of 2% per month.
Talking about the rule for MCD, Rajiv Mishra, a Delhi-based advocate, said, “If someone fails to pay property tax on time, some municipal corporations initially give a show cause notice to recover the dues. If someone fails to pay it even after the notice, the authority can recover the same under Sections 155 and 156 of the Delhi Municipal Corporation Act, 1957, by way of attachment of property, bank account, rent and all moveable properties, but such steps are typically taken in extreme cases." Wilful default may also attract rigorous imprisonment for a term of seven years and a fine, added Mishra.
Non-payment of property tax can become a bone of contention if you plan to sell the property. The buyer would, typically, demand clearance of all past dues before sealing the deal. Don’t forget to collect the challan or receipts of the payment. These will be useful if you plan to sell the property. It is also important to note that the onus of paying property tax is on the owner, and not the occupant or tenant. So make sure you pay your property tax on time.