Owning property has become a common milestone for many, but along with ownership comes the responsibility of paying property tax.
Far from being just another bill, property tax is a cornerstone of community development, funding essential services like schools, parks, and public safety. Knowing its implications and benefits can help you make informed decisions and manage your finances more effectively.
As a homebuyer searching for a 2 BHK flat in Chennai, this blog will help you understand property tax, its significance, and key aspects.
What is Property Tax?
Property tax in India is a tax levied by our government on real estate properties, including residential and commercial. The assessed value of your property determines the amount of property tax.
As a property owner, you are required to pay this tax annually. This tax funds public services, including schools, police departments, and infrastructure development.
Understanding the Implications of Property Tax
Property tax plays a significant role in property ownership, influencing individual finances and the broader community. Here’s a closer look at its implications:
. Funding Local Services
Property tax is vital in financing local services. These may include schools, parks, public safety, and road maintenance. It implies that you are actively supporting the growth and well-being of your community.
. Impact on Property Value
Property tax is responsible for affecting property values indirectly. If property taxes are high in a neighbourhood, it may deter potential homebuyers. It leads to decreased property demand and lower property values. On the contrary, well-funded public services will likely enhance property values in certain areas.
. Budgeting and Financial Planning
As a property owner, you must account for property tax payments in your budget and financial planning. Understanding the annual tax obligations is crucial for ensuring proper financial management.
How to Calculate Property Tax for a 2 BHK Apartment in Chennai?
Calculating property tax for a 2 BHK apartment in Chennai involves several steps based on the plinth area (total floor area, including walls) and the base street rate per square foot. Here’s how:
- Determine the Monthly Rental Value: Multiply the plinth area by the base street rate per sq. ft.
- Calculate Annual Rental Value (ARV): Multiply the monthly rental value by 12.
- Separate Land and Building ARV: Subtract 10% of the ARV (land value) to calculate the ARV for the building.
- Apply Discounts: Account for occupancy (rented or owned), property usage (residential or commercial), and depreciation (1% annually for buildings over 4 years, up to 25%).
- Recalculate ARV: Add the land value (10% of ARV) to the discounted building ARV.
To simplify, use this formula:
ARV for Building = Monthly Rental Value x 10.92
ARV for Land = Monthly Rental Value x 12
Finally, calculate half-yearly property tax based on specific percentages of the ARV, including a 10% library cess.
Exemptions and Rebates for Property Owners
Property owners of 2 BHK apartments in Chennai can take advantage of several exemptions and concessions on their property tax, subject to eligibility. Here’s a detailed overview:
Exemptions
Government-Owned Properties: Properties owned by the Central Government and buildings occupied by foreign missions are entirely exempted from paying Chennai property tax.
Concessions
- Rebates Based on Structure:
- Semi-permanent buildings are eligible for a 20% rebate on the monthly rental value (RLV).
- Residential buildings that are non-rented and owner-occupied receive a 25% rebate on the monthly RLV.
- A 10% rebate on the monthly RLV is available for owner-occupied commercial portions of a building.
- Depreciation for Older Buildings:
A 1% depreciation is allowed annually for buildings over four years old, capped at a maximum of 25%.
- Library Cess:
A 10% library cess is applied to the general tax portion of Chennai property tax.
- Tiled or Thatched Structures:
Structures with tiled, thatched, or non-terrace roofing enjoy a 20% rebate on the monthly rental value.
By understanding and applying these exemptions and rebates, property owners in Chennai can significantly reduce their tax liability. Ensure to check the eligibility criteria for each concession to maximise savings on your 2 BHK apartment’s property tax.
How to Manage Property Tax?
Effectively managing property tax obligations is essential for property owners. Here are some tips and strategies:
- Understand Local Tax Laws
As a property owner, you must familiarise yourself with the property tax laws and regulations according to your location. It allows you to stay updated about any changes impacting your tax liabilities.
- Keep Records and Receipts
You must maintain organised records of property-related expenses, improvements, and tax payments. These records will be valuable when claiming deductions and exemptions during tax filing.
- Appeal Property Assessments
If you believe your property was overvalued during the assessment process, consider appealing the assessment to lower your tax liability.
Promptly Paying Property Tax India
Property tax in India is an essential aspect of property ownership that requires careful attention. Understanding its calculation, implications, and available exemptions can help manage tax obligations efficiently.
This is particularly useful for those in search of a 2 BHK flat for sale in Chennai. By proactively managing property tax, owners can contribute to the development and improvement of their communities.
Looking for a 2 BHK in Chennai that offers comfort and luxury? Then make sure to connect with trusted real estate developers like Mahindra Lifespaces. With a focus on building sustainable and well-located communities, they are focused on creating exceptional living spaces.