Land tax: Meaning, charge, calculation, online and offline payment

Real estate ownership comes at a cost. You also have to continue to pay a price for the ownership of the title, once it is attached to your name. Under the specific state laws, the owner has to pay a bi-annual or annual property tax on various types of real estate possessions – land, plot or any improvements made on these pieces of land, including buildings, shops, houses, etc.

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Land tax falls under the broad definition of property, and owners also have to pay annual tax on their plot and land parcel holdings as well aside from paying property tax for flats, apartments, bungalows, mansions and villas. Let us find out who imposes land tax and the methods used to calculate the land tax for your property.

Who imposes land tax?

Also known as land tax, property tax is one of the major sources of income for city municipal bodies. Municipalities use different methods to arrive at the annual value of your real estate asset and impose a tax rate, depending on that value. This tax has to be paid one or twice in an assessment year, to the local municipal body in your area. The revenue generated through land tax collection, is used by the civic body to build and improve the infrastructure in the area, apart from offering and maintaining amenities including water and power supply, sewage systems, lighting and cleanliness. As civic bodies have different rules and valuation methods, the rate of land tax is different from one area to another area and one city to another city.

know about: income tax assessment order

Who should pay land tax?

Note that the owner does not have to pay any land tax, as long as the plot is vacant. This is, however, not true for a vacant house.

Also, land or property tax is not the same as the annual tax that you are liable to pay every year from your income, under the income tax laws. On your annual income, you have to pay taxes on your real estate assets under the head income from house property, under the IT Act.

How is land tax calculated?

Based on several factors, such as the size, location and amenities, civic bodies attach an annual value to properties in their area, for land tax collection purposes. However, they use different methodologies to arrive at this calculation. There are primarily three land value calculation methods applied by the many municipal bodies in India, to establish this annual payment liability.

What is land tax and how to pay it online?

Annual rental value system

Municipal bodies in Chennai and Hyderabad use this method, to calculate annual property value. Every property has the potential to generate a particular monthly rental, irrespective of whether or not it is actually rented out. Based on the annual rental value of your property, a certain percentage of your earning has to be paid as land tax.

Unit area value system

Municipalities in Ahmedabad, Bengaluru, Delhi, Kolkata, Hyderabad and Patna use this system, to calculate land tax. Under this method, a per-unit price is attached, based on its built-up area or carpet area. While deciding the value, the location and usage of the property plays a vital role and a tax rate is applied, depending on the expected returns on the property.

Capital value-based system

The Brihanmumbai Municipal Corporation (BMC) intended to frame rules for levying property tax, based on the capital value of a property. However, the Bombay High Court scrapped the order in April 2019. Under this system, the market value of the property, which is revised on an annual basis by the civic body, is used to determine the land tax.

See also: How to calculate land value?

A guide to paying property tax in the top cities

See also: Kerala land tax

How to pay land tax?

Most civic bodies in India have now switched to the online mode, for payment of land tax. So, you can pay land tax online on the website of the municipal body, or by downloading the app of your municipal body on your mobile phone. Land tax payment can be done online, using your property’s unique ID and PIN allotted to you. The payment can also be done using net banking, debit/credit card and mobile wallet credentials. Alternatively, you could also pay property tax offline, by visiting the municipal office, where you can fill and submit the suitable form and make the payment through cheque.

Tax on vacant land

While it was not a common practice earlier, many local bodies in big cities have now started to impose land tax on vacant plots and land parcels in the city limits. This is particularly true if the vacant plot is located in a premium location. The tax on vacant plot by municipalities is levied on the premise that such treatment of the land amounts to wasteful use of highly expensive resources.

Information required to pay land tax online

A user trying to pay land tax online has to keep the following details handy:

Name
Address
Property ID number
Email ID
Phone number

For payment

Debit card details
Credit card details
Net-banking details
E-Wallet or UPI details

Rebates on land tax

Municipal bodies across the country offer various rebates to tax payers, based on a variety of factors.

Depending on the age of the owner: Rates are lower for senior citizens.

Depending on the nature of the area: Rates are lower for properties in flood-prone areas.

Depending on the usage of the property: Rates are lower for properties meant for public use or owned by charitable trusts.

Depending on the age of the property: In some cities, old properties attract lower property tax.

Depending on the property’s occupancy: In some cities, the longer you have stayed in the property, the lower the rates.

Depending on the income of the owner: Land tax rates are also lower for people from the economically weaker sections and low income groups.

FAQs

What is land tax?

Owners have to pay a tax, for the ownership title of their property, to their respective civic bodies. This may be a bi-annual or annual property tax and is applicable on real estate possessions including land or plot, or any improvements made on these pieces of land, including buildings, shops, homes, etc.

What is the unit area value system?

Municipalities in Delhi, Bengaluru, Kolkata, Ahmedabad, Hyderabad and Patna use this system to calculate land tax. Under this system, a per-unit price is attached, based on the built-up area or carpet area. The location and the usage of the property also determine the tax rate that will be applied, which is based on the expected returns from the property.

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Sunita Mishra

An alumna of the Indian Institute of Mass Communication, Dhenkanal, Sunita Mishra brings over 16 years of expertise to the fields of legal matters, financial insights, and property market trends. Recognised for her ability to elucidate complex topics, her articles serve as a go-to resource for home buyers navigating intricate subjects. Through her extensive career, she has been associated with esteemed organisations like the Financial Express, Hindustan Times, Network18, All India Radio, and Business Standard.

In addition to her professional accomplishments, Sunita holds an MA degree in Sanskrit, with a specialisation in Indian Philosophy, from Delhi University. Outside of her work schedule, she likes to unwind by practising Yoga, and pursues her passion for travel.
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