What are Property Taxes?
Property taxes are a suite of taxes levied on land and building.
How is Rateable Value determined?
The Ratable Value is calculated as the rent that a property fetches or may fetch, minus certain deductions. Various parameters of the property like its construction type, usage type, etc. determine which method is applied to compute this value. In cases where a property is let out on rent, this rent is the base for computing the RV. However, in cases where the property is owner occupied, the rent-earning capacity of that property is estimated using the Residential Letting Rate or RLR Method.
How is tax liability calculated?
A property is assessed using one of the various methods of computing rateable value. The Rateable Value (RV) forms the tax base and the tax rates as per the table above are applied to derive the annual tax liability of
a property.
Why is the tax rate higher than 100%?
The Rent Control Act does not allow for re-assessment of properties unless they are altered. Thus, the tax base (rateable value) of a property once assessed becomes frozen in time. The tax liability does not keep pace with the cost of service delivery. To only method to offset the inability to revise the tax base, is to increase the tax rate. Over time, this has led to the tax rate rising above 100%.
How do I pay my Property Taxes?
Your annual tax liability is billed to you in two instalments, one for each semester. You can pay your property taxes at the Citizen Facilitation Counters (CFC) of the ward that the property is assessed under.
Who can be contacted with reference to billing?
The Assistant Assessor and Collector of the ward where the property is assessed may be contacted with reference to issues regarding assessment of your property.
What is the Direct Tax benefit?
Income Tax Act, 1961, as amended from time to time provides benefits in the form of lower level of Tax on Capital Gains computed with reference to the benefits of indexation allowance to cover inflation.
What is income from house property?
The annual value of any property you own is taxable under the head ‘income from house property’. While there are a few deductions available from this income, income from a property is not taxable under the head ‘income from house property’ when...
a. The property is used for one’s own business or profession.
b. The property is self-occupied.
c. It is income from a farmhouse.
d. It is the property income of a local authority.
e. It is the property income of a university or an educational institution.
f. It is the property income of a trade union.
g. It is property held for charitable or religious purposes.
h. It is the property income of a political party.
i. It is the property income of an approved scientific research association.
What is annual value of the house property?
The annual value of house property has been defined as ‘the amount for which the property may reasonably be expected to be let out for a year’.
However, if your property is let out for the whole or a part of the financial year, the gross annual value will be the amount received during the year as a result of the letting out of the house property. This shall also exclude the rent that the taxpayer is unable to realise in the financial year.
The following four factors have to be taken into consideration while determining the annual property:
a. Rent payable by the tenant.
b. Municipal valuation of the property.
c. Fair rental value (market value of a similar property in the same area) of the property.
d. Standard rent payable under the Rent Control Act.
What is gross annual value?
In the case of self-occupied property, the annual value is taken to be ‘nil’.
In the case of property that is rented out, the gross annual value is the municipal value, the de facto rent (whether received or receivable) or the fair rental value, whichever is highest. If, however, the Rent Control Act applies to the property, the gross value cannot exceed the de facto rent or the standard rent under the Rent Control Act, whichever is higher.
What are the deductions from the annual value?
No deduction is available from the net annual value of a self-occupied house property, since the net annual value of a self-occupied house property works out to be ‘nil’. The only exception is in the case of interest payments on borrowed capital.
Finance Bill 2001 seeks to replace section 24 (which deals with deductions from the net annual value of a house property) with a new section. Accordingly, only the following two deductions will be allowed from the net annual value (which is gross annual value less municipal taxes ‘paid’ and not ‘accrued’) to arrive at your taxable income under the head ‘income from house property’:
How much is the Repairs and collection charges?
30 per cent (instead of the earlier 25 per cent) of the net annual value will be allowed as a deduction towards repairs and collection of rent for the property, irrespective of the actual expenditure incurred.
What is the Interest on borrowed capital?
The interest on borrowed capital will be allowable as a deduction on an accrual basis if the money has been borrowed to buy or construct the house. However, the money paid as brokerage or commission to get the loan is not allowable as a deduction.
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