The Importance of Property Tax - What Every Homeowner Needs to Know

A property purchase involves more than just a one-time investment; it comes with the responsibility of paying annual property taxes to civic authorities. Paying property tax is an essential responsibility that every homeowner must fulfill. Property tax, often overlooked during the property purchase process, plays a vital role in funding local infrastructure and civic amenities.

This ongoing annual expense supports community services such as education, parks, transportation, and road maintenance. Understanding the significance of property tax can help homeowners plan their finances better and avoid potential legal consequences.

Ghar explores further details about Property Tax below:

Ongoing Liability: Property Tax

While buying a property is a significant one-time investment, involving a lifetime of savings for the down payment, it is not the end of expenses for homeowners. An ongoing liability for every homebuyer is the property tax, which must be paid to the local municipal corporation. Although this expense rarely influences the home-buying decision, it is crucial for buyers to be aware of it.

Statutory Obligation: Understanding Property Tax

Property tax is levied annually or semi-annually on all properties, including commercial, residential, and rented spaces. This tax is a major source of income for local and state governments, funding civic amenities and services such as education, parks, transportation, road maintenance, sewage systems, and other infrastructure. Initially, the builder pays the property tax for the land to the government, but once ownership is transferred to homeowners, they are responsible for paying this tax to the civic authorities.

Calculating Property Tax: Different Methods

Every municipal body in India uses different methods to calculate property tax. The three most common methods are the Capital Value System (CVS), Unit Area Value System (UAVS), and Rateable Value System (RVS). In Mumbai, the Municipal Corporation of Greater Mumbai (MCGM) uses CVS, which calculates the tax based on factors such as ward, zone, locality, area, usage, occupancy type, total carpet area, year of construction, floor type, and more.

Rustom Sheri, a residential property owner, mentioned that while he was not initially concerned about property tax while house hunting, he inquired about it before finalizing the deal because it would impact his yearly financial budget. He noted that it is particularly important to know about this expense if purchasing a large apartment in a posh locality, as the tax percentage would be higher compared to other areas.

Penalties for Defaulters: Importance of Timely Payment

Homeowners must pay property tax annually. Failure to do so results in penalties based on state and municipal regulations. Persistent defaulters risk losing legal ownership of their property. A property lawyer in Mumbai explained that if a homeowner avoids paying tax, the government has the authority to seal and auction the property. The buyer from the municipal auction then acquires the property's title.

It is crucial to meet this expense on time to avoid severe consequences. Additionally, some municipal corporations offer exemptions based on property type, age, location, and the owner's net income. Homeowners should verify these details with their local administration to assess their tax liability accurately.