India Property Tax Guide

Municipal Property Tax (House Tax)

• Mumbai (BMC): Calculated based on the Capital Value System (CVS) — 0.25% to 1% of the capital value depending on the property type and usage (residential, commercial, industrial).
• Delhi (MCD): Based on the Annual Rental Value (ARV) system, with rates ranging from 5% to 20% of the ARV depending on the category (A to H colonies).
• Bangalore (BBMP): Calculated using the Unit Area Value (UAV) method based on the location, usage (residential/commercial), type of construction, and the built-up area.
• Chennai (GCC): Based on the plinth area and the annual rental value, with rates determined by the zone classification.

Property tax is deductible against rental income under section 24(a) of the Income Tax Act. Homeowners can claim a deduction of 30% of the net rental income (standard deduction) plus the actual municipal tax paid.

Stamp Duty and Registration

• Stamp duty: 5-7% of the property value (varies by state). Some states offer lower rates for women buyers (e.g., Delhi: 6% for men, 4% for women; Karnataka: 5% standard, 3% for women).
• Registration fee: Typically 1% of the property value, subject to a maximum cap (varies by state, e.g., Delhi: 1% up to INR 30,000 maximum).
• Circle rate (guidance value): The minimum value at which a property can be registered. Even if the actual consideration is higher, stamp duty is payable on the higher of the circle rate or the consideration.

TDS on Property Purchase

Under section 194-IA, the buyer of an immovable property (other than agricultural land) must deduct TDS at 1% on the consideration exceeding INR 50 lakh. The TDS must be deposited with the Income Tax Department within 30 days of the deduction, using Form 26QB. The buyer must also file a TDS return and issue a TDS certificate (Form 16B) to the seller.

Tax on Rental Income

Rental income from property is taxed under the head "Income from House Property". The net taxable income is calculated as: Gross Rent minus Municipal Tax Paid equals Net Annual Value (NAV); NAV minus 30% Standard Deduction (section 24(a)) minus Home Loan Interest (section 24(b), up to INR 2,00,000 for self-occupied) equals Taxable Income. Rental income is taxed at the applicable slab rate.

FAQs

Is property tax the same as wealth tax?

No. Wealth tax was abolished in India from 1 April 2015. Municipal property tax is a local tax levied by municipal corporations, not a wealth tax. Property owners only pay property tax to the local municipality.

Can I claim a deduction for home loan interest?

Yes. Under section 24(b), interest on a home loan up to INR 2,00,000 per year is deductible for a self-occupied property. For a rented property, the entire interest is deductible with no upper limit. Under section 80EEA, first-time home buyers can claim an additional deduction of up to INR 1,50,000 on home loan interest.

What is the difference between stamp duty and registration?

Stamp duty is a tax paid to the state government on the property transaction (typically 5-7% of the value). Registration fee (typically 1%) is the fee paid to register the sale deed with the sub-registrar of assurances. Both are mandatory for the legal transfer of property ownership.