Property Tax

What is Property Tax?

w It's a necessary source of income of the local governments like municipal corporations, municipalities, or panchayats, which utilize such revenues towards providing basic amenities such as supply of water, sanitation, street lighting, and road maintenance. If you are a property owner in India, this tax is your contribution to keep your town or city functioning well.

Purpose of Property Tax in India

Property tax fulfills several important functions at the municipal level:

• Finances civic amenities: Funds garbage disposal, water supply, sewage, and other facilities in your area.
• Enhances infrastructure: Puts up with the maintenance of roads, parks, streetlights, and public spaces within the community.
• Enables municipal governance: Empowers city government to act independently without dependency on state or national government funds.
• Promotes equal contribution: Empowers homeowners with the option of contributing their own fair amount of property tax towards local services proportionate to their property's worth.

How It's Determined and Collected in India?

The method of computation of property tax varies between Indian cities and states, but essentially encompasses the following processes:

• Property valuation: The property value is assessed by the local government using methods like Annual Rental Value (ARV), Unit Area Value (UAV), or Capital Value System (CVS), depending on the city—e.g., Mumbai uses the CVS, while Delhi uses the UAV.
• Tax rate application: A percentage rate is applied to the assessed value, varying by property type (residential, commercial, or vacant land) and location (urban or rural). As of 2025, this rate generally varies between 5% and 20% of the assessed value, although this varies from one municipality to another. For instance, in Hyderabad, the Greater Hyderabad Municipal Corporation (GHMC) charges a composite rate of around 30% on the ARV, namely, house tax, lighting tax, and other cesses. In Delhi, luxury residential properties (Category A and B) can be levied at a rate of 12%, and commercial properties like multiplexes can be taxed at 20%.
• Other considerations: Some cities factor in the age of property, type of construction, and use (self-occupation or rent) to differentiate the tax amount.
• Billing and payment: Tax bills are provided to the property owner, normally every year, with payment dates notified by the local authority—many cities have online payment facility through their web portals nowadays.

Impact on Property Owners in India

Property tax will make a substantial difference to your budget as a property owner:

• Ongoing cost: It's an ongoing expense that you need to account for, especially if you have multiple properties or a commercial property.
• Location-based variation: Rates of tax can be higher in large metros like Mumbai or Bangalore, where rates can approach 15-20% of the value charged, while in smaller towns or villages rates can be around 5-7%. Goa and Uttarakhand would have lower rates, even as low as below 10%.
• Consequences of default: Defaulting on the time payment will attract penalties, interest (between 5% and 20%, depending on the state), or even a lawsuit, such as attachment of property by the municipality.
• Impact on rental income: As a landlord, an elevated property tax could reduce your rental income after tax, since your tenants would not pay for this.

Ways to Adjust to Property Tax in India

There are practical ways of addressing or perhaps mitigating your property tax burden:

• Look for exemptions: Most municipalities have rebates, including women property owner discounts, senior discounts, or charitable-use properties—some municipalities grant up to a 5-10% discount for early payment.
• Pay on time: Receive early payment discounts—some councils offer a 5-10% discount if you pay ahead of time compared to the due date, as the 15% discount offered in Delhi when you pay by June 30.
• Challenge the assessment: If you are of the opinion that the value of the property is higher than necessary, you can object with the local council, providing evidence like similar values of other properties.
• Stay updated on rules: Property tax rates and rules can also fluctuate, so keep an eye out for announcements by your local municipal authority to surprise-proof your notice of tax—Delhi, for example, has had incremental hikes over the last few years, with a proposed 37% rise in base unit area value on the anvil.