Property Tax India

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For income tax purposes in India, property is considered as a source of income and hence, tax is levied on that. Properties usually include building, flat, shop etc. as well as the land appurtenant to the building. Under the Income Tax Act, incomes from the properties are regarded as one of the heads of income. The amount of tax is calculated on the value of the property being taxed.

It is the local municipality authority that levies property tax for the maintenance of basic civic services in the city. Unlike the countries like UK where the occupier is liable to pay the property tax, it is the liability of the property owner to pay the property tax in India to the concerned municipalities.

India Property tax is levied on the real estates which consist of buildings or land attached to the buildings. Vacant plots of land without any adjoining building are not liable to be taxed under this head. It will rather be taxed as income from other sources. Following are the kinds of properties that are liable to be taxed under property tax India:
  • Residential house (self-occupied or let out)
  • Office Building
  • Factory Building
  • Godowns
  • Flats
  • Shops

Calculating Property Tax India

Property tax in India is calculated on the basis of ‘Annual Value’. There can be different Annual Values for self-occupied and let out properties.

Annual Value for Let out Property

In case of let out property, the annual value would be equal to the maximum of the following:
  • Municipal Valuation
  • Rent Received
  • Fair Rent as determined by the Income Tax department
Deductions: Deductions are allowed on the interest on the loan to build, buy or repair the property. A deduction of 30% of the net value is allowed for the repair and maintenance of the property.

Annual Value for Self-occupied Property

For self-occupied property, the annual value is taken as zero, provided that the property is fully used for own residential stay. It the owner doesn't occupy the property, nor he lets it out, the annual value of the property would be zero again. If the property is given on rent for a few months, the annual value will be calculated proportionately.

Deductions: Owners are entitled to get deductions in the form of interest on loan taken for the construction or purchase of the property. The interest payable is subject to a max of Rs. 1,50,000 (loan taken on or after April 1,1999) and Rs. 30,000 (loan taken before April 1, 1999).

Last Updated on July 3, 2015

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