Property Tax

Property Tax is a tax levied by local authorities on owners of real estate such as residential, commercial, or industrial properties. It is a recurring tax used to fund civic services like roads, sanitation, water supply, and infrastructure.

It is also commonly referred to as municipal tax.

1. Who is Liable to Pay

• The owner of the property is responsible for payment
• Applies to:
  • Residential properties
  • Commercial properties
  • Vacant land (in some cases)

2. How Property Tax is Calculated

The calculation depends on local authority rules and may consider:

• Location of the property
• Type of property (residential/commercial)
• Size and construction
• Annual value or rental value

Each municipality follows its own method.

3. Payment Frequency

• Usually payable annually or semi-annually
• Some municipalities offer discounts for early payment

4. Tax Treatment Under Income Tax

Property tax has relevance while computing income:

• Allowed as a deduction from Gross Annual Value (GAV)
• Deduction is allowed only if the tax is actually paid during the year

This reduces taxable income from house property.

5. Difference from Other Charges

• Property Tax: Paid to government (municipality)
• Maintenance Charges: Paid to society or association
• Utility Bills: Paid for services like electricity or water

Only property tax is allowed as deduction under house property.

6. Common Mistakes

• Confusing maintenance charges with property tax
• Claiming deduction without actual payment
• Not keeping payment receipts
• Ignoring timing of payment

Practical Insight

Most people pay property tax but don’t use it properly in tax computation.

Here’s what matters:

• it reduces taxable rental income
• deduction is based on payment, not due date

So timing your payment can have a small but real tax impact.

How N D Savla & Associates Can Help

At N D Savla & Associates, we help you:

• Accurately compute house property income
• Ensure correct deduction of property tax
• Maintain proper documentation
• Optimise tax impact on property income