The real estate sector is currently in the middle of a slump, with property sales depreciating by 30% during the initial months of 2020. This is an upshot of the present economic crises prevailing in the nation.
- As per a survey, market sentiment regarding real estate purchases dropped to just 22 of the Real Estimate Sentiment Survey Index, which is the lowest to date.
- Nevertheless, the survey also claimed that 50% of its respondents were planning to buy a home in the next six months.
There are various factors that prospective property owners should learn about their homes before initiating the purchase. Additionally, they must also assess how to pay property tax online before its due date.
What is a house or property tax?
The first pointer to know about property tax in India is that it is not imposed by the Central Government. The country’s state governments are responsible for levying and collecting it. More specifically, municipal corporations, working under the state authorities, collect the taxes from property owners within India.
Due to this state-wise implementation of house taxes, rates, and other terms tend to differ between one municipal corporation and another. For example, individuals looking to service property tax in Delhi would need to determine which of the three operating municipal corporations they belong to – East Delhi Municipal Corporation, South Delhi Municipal Corporation, or North Delhi Municipal Corporation.
The actual rates of taxes and their calculation can differ significantly based on one’s area of residence.
Why should you pay house taxes?
One of the biggest reasons to pay house tax in Delhi is because this income aids the local municipality to undertake repairs and renovations in the area. For instance, road repairs, electricity, and much more are partly funded by taxes collected from residential properties.
Besides these administrative benefits, house tax receipts are among the documents needed to apply for a loan against property. Therefore, if an individual is planning to mortgage his/her owned land or home, he/she would need to submit tax receipts to prove that all such liabilities are clear.
- Late payment of property tax can result in hefty fines, depending on one’s state or locality of residence.
- Generally, this penalty ranges between 5% and 20% of the total outstanding dues.
The formula for house tax calculation
Before a potential borrower can pay property tax online, he/she must know the exact formula for its calculation. Unfortunately, due to the lack of a standardized system, property tax is calculated in India using three different methods. These include –
- Annual rental value
- Unit area system
- Capital value system
Here is a look at what these entail –
Annual rental value method
This method of taxation follows the premise that taxation on a property depends on its yearly rental value. Annual rental value (ARV) can be calculated as –
ARV = (Basic rate per sq.ft x Plinth area x 12) – 10%
Delhi is one of the prominent cities where property tax is calculated using this annual rental value system. Pay property tax online after assessing how much is due, using this method of calculation if you are a Delhi resident.
Unit area method
This taxation assessment system relies on the returns generated from property to determine one’s liabilities. Location, usage and square foot measure of a unit are the three factors considered in this calculation.
Hyderabad, Kolkata, Bangalore, Ahmedabad, and Patna are some of the cities, where this method is employed.
Capital value method
The market value of a property, determined by the stamp duty department in the locality, is considered when assessing property taxes under this system. Mumbai follows this process to calculate tax liabilities for its property owners. The formula is –
Property tax = Property base value x Type of property x Age of property x Built-up area x Floor factor x Category of usage.
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How to pay property tax online?
Payment of house tax is streamlined thanks to the online process followed today. Here is how one can clear such taxes –
- Visit your concerned municipality’s official website and select the ‘Property Tax’ tab.
- Select the correct form from the ones available and choose the year of assessment.
- Fill in the property identification number or property tax number, along with other essential details.
- Choose your preferred mode of payment from options like credit card/debit card/internet banking.
Do not forget to keep a copy of the house tax receipt after you pay property tax online. These can ease the process of availing certain loans, including a loan against property.
Reputed financial institutions also provide pre-approved offers to accelerate and streamline the loan application process. Such offers are available on a range of financial products, including home loans, loan against property, and others. You can check your pre-approved offer by providing a few essential details.
Individuals must remember that to qualify for a loan against property, one must meet certain criteria, one of which is possessing house tax receipts for the property in question.
Before planning how to use a loan against property, applicants must ensure that they possess the required documents. House tax receipts are an important part when it comes to eligibility for such loans.