Property tax – Overview, Systems for its Calculation and Payment Methods

Property tax constitutes one of the major sources of revenue for the government at the state level. The local municipalities collect this tax from real estate owners to upkeep and maintain different civic amenities, for example, roads, footpath, street light, sewage systems, etc. 

The local authority like a municipality thus levies a tax on a property after assessing the same. While some municipalities allow residents to pay this tax annually, some others collect it semi-annually as well. The concerned governments also take initiatives like online tax payment options to make the payment procedure hassle-free. However, as these taxes are mandatorily payable by eligible residents, it is of utmost importance for property owners to gain a clear idea about how to pay municipal tax online. 

A brief overview of property tax

Property tax is levied on real property (land and building) within a municipal jurisdiction with the purpose to maintain and develop urban areas. It is also called house tax, and the local municipal body imposes such tax after assessing the property size, type of construction, location, etc. However, lands without any structure are exempted from this tax.

Since all real estate owners are liable to pay this tax, they need to gain a clear understanding of how this tax is calculated. Furthermore, they should proceed to learn about how to pay municipality tax online to avoid any hassle during such payment. 

On a different note, a list of documents needed to apply for a loan against property also includes property tax receipts. Hence, in a way, paying property tax in time also increases your loan eligibility.

How are property taxes calculated?

Municipal bodies levy property tax after reviewing different aspects of the concerned property. Therefore, if a taxpayer calculates the tax payable in a financial year beforehand, it will help him/her to plan for such payment efficiently. Different municipal corporations adopt mainly three methods to calculate property taxes payable.

Annual rental value system

Under this system, a municipal body fixes the gross rental value of a property, and levies tax on the estimated value accordingly. However, the relatable value depends on several aspects like the property’s location, size, amenities provided, and others. 

In this regard, cities like Delhi, Chennai, among some others, follow this system. Following is the calculation rule for such property tax. 

Annual rental value = Monthly rental value x 12 – 10%.


Monthly rental value = Basic Rate/sq. ft x Plinth Area.

Unit area system

Under the unit area value system, the tax amount is determined based on the anticipated return from the property. Cities, for example, Kolkata, Bangalore, Hyderabad, etc. adopt this system to assess the tax liability. 

Following is the formula to calculate property tax under this system –  

Annual Value = Covered Area x Unit Area Value x Use Factor x Structure Factor x Age Factor x Occupancy Factor

Capital value-based system

In this system, the market value of a property is considered for tax calculation. Nonetheless, the stamp duty department in a particular locality determines the market value of a given property. For instance, Mumbai follows this method of calculation. Following is the formula to calculate property tax under capital value-based systems. 

Property tax = Base Value × Built-Up Area × Type of Building × Age Factor × Category of Use × Floor Factor

What are the payment methods of property tax?

In India, you can pay property tax online as well as offline. For online payment, one needs to visit the official website of the local municipality or state to complete tax payment. On the other hand, to do the same offline, one needs to visit the office of a concerned municipal corporation and pay the amount in person.

However, several individuals still find it challenging to pay the tax online. Hence, before opting for this mode, property owners need to learn about how to pay municipal tax online. Moreover, paying this tax also plays a vital role in case one wants to avail secured credit options like loan against property. 

Top lending institutions in India offer such secured loans of up to Rs.1 crore for salaried individuals and up to Rs.3.5 crore for self-employed ones at competitive interest rates. 

They also provide pre-approved offers on several financial products like loans against property, home loans, etc. and make financing hassle-free. You can check your pre-approved loan offer online by entering your name and contact details. 

Individuals often mortgage their property to borrow funds for diverse financial requirements. In this regard, when an individual proceeds to apply for a loan against property, he/she must keep the latest property tax receipt ready along with other documents to apply. Paying land tax online can thus reduce the hassles of obtaining a receipt when availing such advance. 

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