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Property Tax

When you own a building, flat, shop, or any other property in India, you have to pay a tax called the property tax. Property tax is an annual amount that is paid by the landowner to the municipal corporation or the local government for his/her area. Property tax is charged on all kinds of tangible real estate assets, whether residential, commercial, self-owned, or rented out. A property tax can be paid both online and offline.

What Is Property Tax?

A property tax is an annual charge levied by the government from the property owners of different properties, such as residential properties and office premises, which is either self-owned or rented out to other people. It is collected by the government to finance developmental and infrastructural activities, such as roads, highways, security, sanitation, etc.

What Are The Types of Property Tax?

Properties are categorized to help the government to estimate taxes easily. This classification is based on specific criteria. Property in India has been divided into 4 types as follows:

  • Personal property includes portable property like cars, buses, cranes, and so on.
  • Land: Land without any buildings or construction on it.
  • Improvements made to land: Man-made constructions on land that are immovable like buildings.
  • Property that is not in the tangible form.

How To Calculate The Property Tax?

A property tax varies across the different states, cities, and countries. Different tax collecting bodies have different ways to compute the property tax. The formula to calculate property tax is as follows:

Property tax = Base value * built-up area * age of the property * type of property/building * category of usage * floor factor

Factors such as the base value of the land, occupancy factors whether self-owned or rented, property type whether residential or commercial, the age of the property, the year of construction, construction type whether multi-floored or single floor. Property tax is calculated through the following methods:

  • Capital Value System: The property value is calculated as per the market value of the property.
  • Unit Area Value System: The Unit Area Value System computes the property tax based on the per-unit price of the built-up area.
  • Annual Rental Value System: The property tax is computed based on the rental value of the property.

The amount of tax payable in the country depends on where the property is situated since taxes vary across states. Civic corporations use different methodologies to evaluate the tax. The basic method is however the same.

Steps to Paying Property Tax Online

Step 1: Visit the official website of your municipality

Step 2: Select the property tax option

Step 3: Enter your property tax number

Step 4: Verify details of the property

Step 5: Select the payment method

Step 6: Receive the challan.

Paying Property Tax Offline

For paying the property tax offline, you are required to visit the office of the municipal corporation of the city. Apart from this, one can pay a property tax in the designated bank branches of the city. You can pay property tax offline using cash or cards.

Interest On Property Taxes

Late payments made towards property tax results in a penalty that is equal to a specific percentage of the amount due. This interest varies from state to state with some states choosing to remove the interest and others charging rates from 5% to 20% depending on their individual policies.

For Example, Some states waived off the penalties while in Bangalore, interest rates were reduced from 20% to 10% to get more people to pay their dues.

Property Tax Deductions Against Income

Deductions from Income from house property as mentioned under Section 24 is applicable in the following scenarios:

  • If you reside in a home that is your only property, then there will be no income from the same.
  • Income obtained in the form of rent and value of additional houses received annually will be taxed after deductions made under Section 24.
  • If you own more than one property, the net annual value of the same, excluding the house in which you reside will be considered as your income.
  • In case you rent out your house or houses, the income received from rent is considered as your income

Deductions under Section 24

If you own a property in India, then you will be eligible for the following deductions under Section 24

  • Standard Deduction: If you are an individual taxpayer, you can get a deduction when the income you receive from your house or houses is 30% of the net annual value. This income is not taxable, but it does not apply if you do not reside in your own house.
  • Interest On Loan: The interest that you pay towards the principal amount of your home loan for purchases, renovation, or construction is deducted from taxes. The interest is the amount you pay in excess of the principal amount. There are 3 clauses in this category:
    • Deduction for loans taken for a house that you are living in is up to INR 2 Lakhs.
    • Even if you have opted for a loan for buying or constructing a house before purchasing it or building it, you will be able to avail deductions. However, in such a scenario, you have to seek deductions on the interest paid towards the principal amount before you purchase the house or complete the construction. You will be eligible for deductions in 5 installments of equal nature. This clause is not applicable to the revamping or redesign of a house.
    • If you have opted for a loan for the purpose of reconstruction or renovation, you will not be able to avail of tax deductions till the completion of the renovation or reconstruction.

Exemptions under Section 24

Section 24 gives the following exemptions:

  • If you do not live in the house for which you have taken a loan, you will be eligible for exemption on the full interest. There is no upper cap for the exemption.
  • If you do not live in the house for which you have taken a loan since you stay in another city as a result of your job/business or if you reside in another property you own or have rented out a house in the same city where you are employed, you are eligible to claim exemption on your interest up till an amount of INR 2 Lakhs.
  • The purchase or construction of the house has to be fulfilled within 3 years of taking the loan for you to be able to claim the maximum deduction of INR 2 Lakhs on the interest amount. In case it takes more than 3 years to fulfill the purchase or construction of the house, you will only be eligible for a deduction of INR 30,000 on your interest amount.
  • Brokerage or commission service providers that aid in arranging loans and tenants do not attract deductions.
  • You should be able to submit the interest certificate for the loan taken as a testimony for the verification process during the computation of tax deductions.

Present State of Property Tax

Property tax in India is levied on "real property," which encompasses land and improvements on it. The government values each property and charges the tax in proportion to its monetary value. The municipality of that particular area is responsible for this assessment and determines the property tax, which in turn can be paid annually or semi-annually. The revenue obtained from this tax is used to improve local facilities, such as road repairs, park and school maintenance, and so on. Property taxes vary from one location to the next, and also between cities and municipalities.


Paying property tax aids the local municipalities to perform certain essential activities, such as cleanliness in the area, water supply, maintenance of local roads, drainage, and other civic facilities. Property tax enables the municipal bodies to obtain cash for financing all the services that it provides.


1. How is property tax calculated?

Property taxes are computed by multiplying the tax rate by the estimated value of the owner’s property. The assessed value estimates the reasonable market price for your house. It is based upon current local real estate market conditions.

2. How can you lower the property tax rates?

  • Comprehend your tax bill
  • Ask for your property tax card.
  • Don’t build
  • Limit curb appeal.
  • Research your neighbours.
  • Walk the home with the assessor.
  • Enable assessor access
  • Look for Exemptions.

3. Are property taxes paid monthly?

Property taxes are paid twice a year or biannually. They are not paid monthly.

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