Property taxes are levied by either state government or local civic bodies. House tax is a kind of property tax levied on house properties, along with appurtenant land. It is governed by Income Tax Act, 1961 together with indirect taxes like GST, stamp duty and property tax. ​As with most real estate tax regimes, the legislation affects the entire lifecycle of constructing, owning, renting and using a property as well the depreciation, repairs and improvements, sale and the deployment of sale proceeds.

Property Tax: This tax is paid annually to the government authorities by the property owners. The tax is collected by the authorities to fund the cost of improvements and establishments of public expenditures and amenities.

Property tax is not calculated uniformly across the whole country. There are different bodies that have been made to calculate the property tax.​

Calculation of Property Tax: Property Tax can be calculated under the following three methods:

·         Unit Area Value System: It calculates the Property Tax based on the per unit price of the built-up area of the property.

·         Annual Rental Value System: Property tax is collected every year under this method. It is the rent estimated by the municipal corporation based on the location and the size of the property.

·         Capital Value System: Under this method, the property tax is calculated based on the market value of the property, which is decided by the government according to the location.  

           Types of Property: Properties are classified into certain categories to help the government streamline the process of estimating taxes based on certain specific criteria.

            Property in India has been divided into the following four categories:

·         Personal Property: Transportable man-made property like cars, buses and cranes is known as personal property.

·         Land: Land in its undeveloped form that is devoid of any form of construction.  

·         Improvements and upgrades made to land: Manmade constructions on land that cannot be moved like buildings.

·         Intangible property: The property that is not in its concrete form is called Intangible property.

           ​​ ​ ​ ​​ ​ ​ ​​ ​ ​ Income Calculation from House Property: One can calculate income from house property based on the following points:

          • Only the net annual value of the residential property is considered for taxation, which is determined by deducting the municipal taxes from the gross annual value of the house. 

          • In case the house is lying vacant for any financial year, then only the rent received for certain tenure is considered as income, and it is not computed for 12 months or the whole year. 

          • In case a house is lying vacant, but the owner is still paying the property tax against it, then, this loan can be offset under the income received from other sources. In case one is unable to consider the same in the current fiscal year then this expense can be carried forward within the next eight years.

Related: Know Your Rights as a Landlord Under the Model Tenancy Act

Income Tax Exemptions under Section 24 of the Income Tax Act: 

Under the section 24 of the Income Tax Act is known as ‘deduction from income from house property. Income, in this case, is earned according to three scenarios:

• Rent received at the rented house is said to be as income. 

• A person who owns more than one house is considered to have the net annual value of the unoccupied house as income. 

• If a person owns and occupies a house, then the income is considered as Nil. However, the rent received through additional houses is eligible for deductions under section 24 of the Income Tax Act.​

Tax Exemptions Offered under Section 80C 

 Under section 80C of the Income Tax Act, the following tax exemptions are offered to the property owners.

• Individuals who purchase a new home can claim deduction under Section 80C on the stamp duty and registration charges. Up to Rs. 1.5 lakhs can be deducted under these charges. 

 • Exemption can be claimed as per this clause for any other expenses undertaken through the transfer of a new residential property.

Related: Know Your Rights as a Tenant under the Model Tenancy Act

Authorities for Collection of Property Tax in Delhi

MCD: Municipal Corporation of Delhi (MCD) is authorized to collect tax from all kinds of properties, like residential, commercial and vacant. The tax collection by MCD is based on the tax estimates derived through the Unit Area System. 

MCD is divided into three zones:

NDMC 

North Delhi Municipal Corporation (NDMC) is authorized for property tax collection in the New Delhi area from property owners and joint owners having rented, sub rented, occupied or non-occupied. It calculates property tax using the unit area value system. Many times the rent is also calculated on the basis of the annual rent value system, where the highest estimate of the annual rent value system or highest of the unit area value system is taken into consideration. Payment can be made at NDMC through a cheque which is payable at New Delhi.

EDMC 

 East Delhi Municipal Corporation (EDMC) is liable to collect property tax from the property owners in the East Delhi zone. You can pay the property tax on their website or through cheques.

SDMC 

 South Delhi Municipal Corporation (SDMC) is responsible for tax collection in the southern zone of Delhi. It is authorized to collect tax for the development and construction of civic amenities in the region under its supervision just like the EDMC and the NDMC. The SDMC also calculates the property tax via the unit area method. In addition to this, the tax collecting authority accepts payments through net banking and cheques.​

Property tax is the mandatory tax that should be paid by every person who owns a property. Nowadays, the Property Tax can be easily paid online. Recently, an app has also been developed to make payment easy. You can also use Google Tez and Paytm to pay the property tax.

Related: How to Calculate Rental Tax in India​