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  • Land Tax and Online Payments

    How to Pay Land Tax

    In India, land tax, or property tax, has to be paid on an annual or bi-annual basis to the government. This is tax paid for the ownership of the title of your property. There are different land taxes based on different parameters of the property with specific rules in various states. It is paid to the local municipal body of the area where the property is situated. Land tax is also applicable for plots of land as well as for improvements that are made on the land and the buildings on the land, whether it is residential properties or shops.

    Importance of land tax

    Land tax is a major source of revenue for municipal or civic bodies to improve the infrastructure of a town or city. The revenue generated from property tax is used for various purposes ranging from the maintaining cleanliness and street lighting to the upkeep of sewage systems as well as electricity and water supply.

    Calculation of land tax

    Land tax is calculated based on the annual value of the property. Different methods are used to arrive at this figure. The rules and valuation methods may differ from each civic body, village, town, and city.

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

    Unit Area Value System: As the name implies, this method uses a per-unit price to determine the property tax. This per-unit price 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 and based on that, the taxes are calculated. This method is used to determine property tax by municipal bodies in the cities of Hyderabad, Patna, Kolkata, Bengaluru, Delhi, and Ahmedabad.

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

    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 in order to calculate the property tax. A percentage of the owner’s earning from this rental value, whether it is rented out or not, has to be paid as property tax. This method is used in the municipalities of Hyderabad and Chennai.

    Who has to pay land tax?

    Land tax has 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 that 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

    The government offers several rebates on land tax based on different factors. This can help you save considerably if you fall into any of the categories that are eligible for these rebates. These are as given below:

    1. Owner’s age: Property tax is lower for owners who are senior citizens
    2. Age of the property: In some municipal areas, older properties attract lower taxes than newer ones
    3. Nature of the area: Property taxes are lower areas that are prone to floods.
    4. Owner’s income: Owners who belong to Low Income Group (LIG) or Economically Weaker Sections (EWS) are eligible for lower property taxes
    5. Occupancy of the property: In some municipal areas, the more duration of stay in a property, the lower the property taxes
    6. Usage of property: If a property is owned by a charitable trust or is meant for public use, property taxes are lower

    Check Out: Tax Savings on Self Constructed Properties

    How to pay land or property tax?

    There are two ways to pay your land or property tax in India today. You can choose to pay it offline or online.

    Offline mode: Visit your municipal office, obtain the form for payment of the property tax, fill it up, and submit it in the office along with the cheque for the payment of the required tax amount.

    Online mode: You can now pay your property or land taxes online through the website of the municipal body in your area. Some municipal bodies also have a mobile application which you can download and then pay taxes. To make the payments, you choose a variety of payment modes such as internet banking, mobile wallets, or your debit card or credit card. A unique ID for your property and a PIN will be allotted to you.

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