Property tax, which is payable by all land or property owners, is one such tax. Unlike income tax, which is the prerogative of the income tax (I-T) department, property tax comes under the respective state governments.
Taxes are not fun by any stretch of imagination. Tax payers try and plan their expenditure in a way that would minimise their tax outflow. While this is a good financial planning exercise, there are certain taxes that, when paid, work out to your own benefit.
Property tax, which is payable by all land or property owners, is one such tax. Unlike income tax, which is the prerogative of the income tax (I-T) department, property tax comes under the respective state governments.
The municipality of the area your property is located assesses the monetary value of your property and you are then supposed to pay a property tax as per the valuation.
Why do we need to pay a property tax?
With so many taxes in the fray already, it is not surprising if you may have this query. The money the state government generates through this tax is used for development of local amenities like roads, maintenance of parks, schools etc.
You can choose to pay your property tax on an annual or half-yearly basis as per your comfort. Either way, paying your property tax on time offers you many benefits in the long run.
Here are five essential reasons why you must choose to always pay up your property tax on time.
1. Early bird benefits
To ensure more property owners pay up their due property tax, many state governments offer an early bird discount. So if you pay your property tax before its due date, you may end up with a handsome discount.
There is no hard and fixed discount on offer since various state governments come up with various schemes to ensure maximum participation in property tax payments. Expect a rebate ranging from 2% to 10% depending on your state and the current scheme in operation.
2. Avoid late payment penalty
Just like paying up early has its benefits, paying up late has its pitfalls. You can be charged a late payment penalty for paying your property tax after its due date. The late payment penalty can be as high as 5-20% of the due amount, which could be quite a lot of money if you own a large-sized property or own property in a prime urban location. When you can easily save money by paying your property tax before the due date, paying up a severe penalty for not complying with the due date is not a smart move.
3. Get in line for income tax benefits
If you have purchased a new house, you can claim tax deductions under Section 80C of the Income Tax Act. So, any payments you made towards stamp duty and registration or any other expenses involved in transferring of your property can get compensated. Since you need a NOC from your municipal corporation to transfer the property in your name or get the registration done successfully, without payment of property tax, you run the risk of losing out on this income tax benefit.
4. Easy payment process
Unlike other taxes that may have complicated computation processes, property tax can be computed easily by just about anyone. All municipal corporations have an online facility where one can auto-generate the tax amount due after providing the details of the property including its dimensions, area, whether it is residential or commercial, occupation status, etc.
You do not need to physically visit your corporation office or stand in long queues to pay tax. You can easily do so by visiting the corporation website, filling out the details, making the payment, and collecting the online receipt. If you have all your property details handy, this process should take no more than a few minutes – a swift, easy process for anyone.
5. Fulfill your tax obligations
Payment of property tax is not only a legal obligation but also a moral one. The amount of tax you pay to your municipal corporation is used to deliver various civic, social, and infrastructural services. So good roads, better schools and hospitals, and civic cleanliness are all inter-related with your property tax payments.
The author is CEO, BankBazaar.com
