Here you must understand that property refers to real estate, whether used for residential, commercial or retail purposes.
Indian tax laws deem property taxable, because they consider it as a source of income. Even the land appurtenant to the building you own is considered taxable. The amount of tax you have to pay on the property is calculated on the value of the property in question.
In the Indian tax structure, it is generally the local municipal authority which levies tax on your property. This money is then used for providing various civic amenities within the city limits. Unlike other countries the owner of the property and not the occupier (in case of a rented property) is liable for paying the property tax in India.
However, if you have vacant plot of land, you do not have to pay property tax. But even if you have a residential property (in which you live) on a plot of land, you have to property tax for the same.
All tax calculations are done on the ‘annual value’ of the property. This figure is arrived after separate calculations for self-occupied and let-out properties. In case of any property you have let out, you will be paying the property tax calculated on the annual value which will be greater of:
- The rent received from the property
- The municipal valuation and
- Fair rent as calculated by the Tax Department.
For self occupied properties, the tax depends on the municipal valuation of the property because there is no element of rent which can be considered in this case.
In both cases you can claim deductions on tax, on the basis of loans taken for the repair, maintenance or construction of the property. Upto 30% of the net value is allowed as deduction. Hope you find this information about paying property tax in India, useful.