Land Tax and Online payments

In India, land or property tax is paid annually or bi-annually to the government. This tax is paid for the ownership of the title of your property. There are different land taxes based on the different parameters of the property with specific rules in various states. The taxes are paid to the local municipal body of the area where the property is situated. Land tax is also applicable to the real estate possessions including land or plot, or any improvements made on these pieces of land, including buildings, shops, homes, etc.

Importance of land tax

Land tax is a major source of revenue for municipal bodies that help them to improve the infrastructure of the city. The revenue collected from the property tax is used for various purposes such as maintaining cleanliness and street lighting, upkeeping the sewage systems as well as electricity and water supply.

Process of land/property tax calculation

The tax on property or land is calculated based on the property's annual value. Different methods are used while doing the tax calculation. The rules and valuation methods might differ from each civic body, village, town, and city.

The tax is based on different parameters such as the location and size of the property as well as the amenities attached to it. There are three types of valuation methods used in India to evaluate the annual value of the property which will determine the property tax. These methods are as given below:

Unit Area Value System: In this evaluation method, the per-unit price is used to determine the property tax which is based on the carpet area or built-up area. The usage of the property and its location plays an important role to determine the returns that can be expected from the property, based on that the taxes are calculated. This method is used by the municipal bodies in the cities of Hyderabad, Patna, Kolkata, Bengaluru, Delhi, and Ahmedabad.

Capital Value-based System: This system has been planned by the civic body, Brihanmumbai Municipal Corporation (BMC). Under this, the capital value of the property is used. They revise the property’s market value on an annual basis under this system. This system was, however, cancelled by the Bombay High Court in April 2019.

Annual Rental Value System: Under this system, the annual rental value of a property, irrespective of whether it is rented out or not, is used to calculate the property tax. The actual or potential monthly rental value of the property is determined to calculate the property tax. A percentage of the owner’s earning from this rental value, whether it is rented out or not, need to be paid as property tax. This method is used in the municipalities of Hyderabad and Chennai.

Who is required pay land tax?

The land tax needs to be paid by anyone who owns a house that is occupied or vacant. However, it does not have to be paid if a plot is vacant. Land tax should not be mistaken for the annual tax which is paid under the income tax laws for real estate assets. The annual tax comes under the Income from House Property head under the Income Tax Act, 1961.

Rebates on land tax

To get rebates on the land tax, you need to fall into any of the below categories-

  • Age of the owner: Property tax is lower for owners who are senior citizens.
  • Age of the property: In some municipal areas, older properties attract lower taxes than newer ones.
  • Nature of the area: Property taxes are lower areas that are prone to floods.
  • The income of the owner: Owners who belong to Low Income Group (LIG) or Economically Weaker Sections (EWS) are eligible for lower property taxes.
  • Occupancy of the property: In some of the municipal areas, the property taxes depend upon the duration of stay in a property. If the duration is for a long time, the taxes will be lower.
  • Property usage: If a property is owned by a charitable trust or is meant for public use, the property taxes are lower. 

How to pay land or property tax?

Offline mode: In an offline mode, you need to visit your municipal office, obtain the form for payment of the property tax, fill it, and submit it in the office along with the cheque for the payment of the required tax amount.

Online mode: In this mode, you need to visit the official website of the municipal body in your area or you can also download their mobile app and pay the tax. A unique ID for your property and a PIN will be allotted to you.