Property Tax

Property tax is a tax assessed on real estate. The tax is usually based on the value of the property one owns. The tax is levied by the governing authority of the jurisdiction in which the property is located. This can be a national government, a federated state, a county or geographical region or a municipality Under a property-tax system, the government requires or performs an appraisal of the monetary value of each property, and tax is assessed in proportion to that value. The property tax rate is typically given as a percentage.

Property tax or ‘house tax’ is a local tax on buildings, along with appurtenant land. It is and imposed on the Possessor (not the custodian of property as per 1978, 44th amendment of constitution). The tax power is vested in the states and is delegated to local bodies, specifying the valuation method, rate band, and collection procedures. The tax base is the annual rental value (ARV) or area-based rating. Owner-occupied and other properties not producing rent are assessed on cost and then converted into ARV by applying a percentage of cost, usually four percent. Vacant land is generally exempt. Central government properties are exempt. Instead a ‘service charge’ is permissible under executive order. Properties of foreign missions also enjoy tax exemption without requiring reciprocity. The tax is usually accompanied by service taxes, e.g., water tax, drainage tax, conservancy (sanitation) tax, lighting tax, all using the same tax base. The rate structure is flat on rural (panchayat) properties, but in the urban (municipal) areas it is mildly progressive with about 80% of assessments falling in the first two brackets.

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