When people say they are successful, what do they mean? In general, they are referring to their career and how it is flourishing; they are referring to the assets they own and the luxury they can afford. While all of that is very desirable, it is secondary. For people to be successful, they first and foremost need to be able to afford the basics of life like food, shelter and clothes. It does not mean that people who are living on rent can’t be successful, but having your own house brings with it a different sense of authority. When one grows even richer, they go on to buy another house or a property that brings them an additional income when they rent it out.
But as they say, everything has its own price tag, and so does owning a property, which is called the property tax.
What is Property Tax?
A property tax is an annual, direct charge that a property owner has to pay to their local government or the Municipal Corporation, whoever is authorised to collect the same in the region. It is different from the GST which is collected by the State Government. Here, property refers to land and any changes made to it. It could be residential, rental, industrial, commercial, or even unused land. Basically, if a person owns a property and is making money out of it instead of living in it, then that property is taxable. On the other hand, if a person owns only one house and is living in it, then there is no tax charged in that case. In other words, necessities are not taxable but assets are.
The criteria of calculating tax on these properties may vary from region to region as different States have different methods of levying taxes.
Where does this Tax go?
The property tax that people pay every year is utilised for their own good – in the improvement and maintenance of the local infrastructure like the roads, water supply, public parks, schools and libraries, and street lighting and fire safety services.
What factors affect the Property Tax?
How tax is calculated on a property can vary and depend on various factors.
- The first one is based on the location of the property. If a property is centrally located, then the tax will be higher than that on a property that is on the outskirts.
- Tax difference also occurs due to difference in the size and area of the property; bigger the property, higher the tax.
- If the property is a commercial one, it will be charged higher than a residential property.
- Senior citizens and women owned properties have a benefit of lower tax rate.
- Property’s age also plays a role in the assessment of its tax. Generally, tax is lesser on properties that are out-dated and more on modern newly built properties.
- There may also be exceptions where the governing body offers concessions or exemption of taxes for properties that are used for education, healthcare or social work.
How Property Tax is Calculated in India
Though a property tax varies from region to region, there are a few general ways of calculating the same.
A). The first one is the Annual Rental Value Method (ARV), according to which the tax on a particular property is calculated by using the estimated rental value of a property over the year, irrespective of whether the property is actually rented out or not. This estimation is dependent on the above discussed factors like location, age, size and condition of the property.
Simply put, ARV = Monthly rental income x 12 months.
Cities like Hyderabad and Chennai go by this method to calculate property tax.
B). The second method is the Capital Value System (CVS). According to this method, the tax calculation is based on the market value of the property and assessed by its taxation rate provided by the State government.
CVS = Market value x Taxation rate / 100
Property tax in Mumbai is calculated using this method.
C). The other one is the Unit Area System (UAS). As the name suggests, this method calculates the tax based on the unit price of the area and is assessed by its taxation rate.
UAS = Unit area value x built-up area x taxation rate
This simpler and more transparent method is adopted in Delhi and Bengaluru.
The Payment of the Property Tax
India has progressed a lot in the previous years. With this progression, one benefit that has accompanied is that payments have become much easier. While the traditional offline payment methods are still functional, the modern online payment criteria have made lives so much easier.
If one has to pay the tax online, they must visit the official website of their municipality and register as a new user or log in, in case of an existing user. Then they’ll need to enter their unique Property Identification number. Their due amount for the respective financial year will flash on their screen, which they’ll have to pay using any of the methods such as credit card, debit card, net banking or UPI.
In case of an offline payment on the other hand, one must visit the local municipality office and clear their payment directly through cash, cheque or demand draft.
What happens in case of Non-Payment of Tax?
In case a person fails to pay the due taxes, he faces serious consequences in the form of interest charged, legal actions taken and amenities withdrawn from the concerned person.
Obstacles in Tax Payment
While some people deliberately run away from paying their taxes, there are others who want to fulfil their duties but are either mis-led or mis-informed about where to go and what to do.
The challenges they face are summed up below:
- In smaller or rural areas especially, people are clueless about the procedure they need to follow in order to pay their taxes.
- The frequent revision of tax rates confuses people who already find it difficult to figure out the amount they need to pay for owning their property.
- Undoubtedly, online payments have made things so much easier and convenient, but they are digital and payments can lag due to a technical error. In such cases, late charges may be applied on even those landowners who were trying to pay their taxes on time.
Conclusion
Inspite of these challenges that one may face, they must definitely pay their taxes regularly in order to enjoy the services rightfully. Citizens should not see it as something that they have to do out of obligation, but realise that it is their contribution towards the development. To be able to pay the taxes in time, one must well understand the process of paying, how much to pay and all other necessities.
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