The annual tax levied on the value of a real estate property is known as the property tax. As the force behind the property tax is the Municipal Corporation, the funds generated through property tax are meant to be used for the maintenance of roads, building educational institutions, and to maintain the infrastructure. Some local governments, while calculating the tax, take into consideration the covered area, location, quality of construction and occupancy status. Although, the tax is only charged on the real estate buildings and not on the plots of land.
The property that the owner needs to pay is decided on the basis of the annual value of the let out or self-occupied property. For the property that is occupied by the owner, the annual value is taken to be zero. Whereas, if the property is let out on rent, the tax is calculated accordingly. However, it is important for you to note that the tax amount calculated by you is just an estimate of what you may have to pay. Usually, the tax rate gets determined at the end of each fiscal year. The advice would be to keep a slightly higher budget than the estimated amount for tax.
Under Section 24, homeowners who have availed loans for the purchase or construction of a new property, anytime after 1st April 1999, and the possession or construction of the property gets completed within 3 years from the end of financial year in which the loan was taken, can claim a deduction of up to Rs 2,00,000 n their home loan interest if the owner or his family reside in the house . Whereas, under Section 80C, you can claim the principal up to the maximum limit of Rs 1,50,000 across all the investments made under the section 80C. Nonetheless, you might be needed to show the lender’s statement showing the not only the interest and principal components but also the repayment for the year.
Failure in paying taxes can lead to fines, overdue, tax liens, garnishment and foreclosure of the property, and can bring down your credit score. Moreover, paying tax will make sure that your property is esteemed appropriately.
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