Property tax, also known as house tax, is a tax that a municipal corporation or local municipal authority levies on your house or other property. This tax is usually taken on an annual basis. However, some municipal corporations also provide the facility to give it on half yearly or quarterly basis.
Who pays property tax?
This tax is taken from the property owners of that area who fall within the municipal corporation area. This is called ad valorem tax, that is, the higher the price of the property, the higher will be the tax. The money that comes from property tax is a main source of income for the local government. This money is spent on the maintenance and improvement of roads, parks, drains, drainage, lighting and other public facilities.
How is property tax calculated?
The procedure may be different for each municipal corporation, as it depends on local laws and rules. But generally a formula is like this-
Property Tax = (Base Value × Built-Up Area × Age Factor × Type of Building × Category of Use) Depreciation
- Base Value: This is the price of property per square feet in that area.
- Built-Up Area: This includes the carpet area, walls and other parts of the house.
- Age Factor: How old the property is. New properties generally attract higher taxes.
- Type of Building: This determines whether the property is residential, commercial or industrial.
- Category of Use: This looks at whether the property is in self-use, rented out or vacant.
- Depreciation: Tax exemption is given according to age and status.
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Tax basis in residential property
Many things are considered while deciding house tax-
- Location: Houses in the center of the city or in prime areas attract higher taxes.
- Age of the property means higher tax on new buildings, but higher depreciation may reduce the tax.
- Taxes are higher on larger sized houses.
- Occupancy tax may be different for self-occupied homes and rented homes.
- Taxes may vary depending on the type of property, whether it is an independent house, flat or condo.
Penalty for late payment of property tax
The property owner should deposit the tax on time. In case of delay, supercharge or interest may be imposed, which can range from 5% to 20%. This interest is charged on the principal amount.