Whether you have bought a fully constructed house or an under-construction property with or without a home loan recently, you will have to pay property tax on it. Other taxes are also applicable on your housing property if it meets certain conditions. Here are some basic details about the taxes you might have to pay if you own a house.
The government of India levies different property taxes on different types of properties. The local municipality or the city government is usually responsible for assessing your property and deciding the amount of tax you have to pay on it. Once the municipality assesses your property and sends you a notification about the applicable tax, you can pay your property taxes either online or offline. Property taxes can be paid annually or semi-annually.
Property taxes depend on the location of the house, the type of the house, its area, etc. Failure to pay these taxes on time may invite penalty or interest on the tax. Check these details on your local government’s website for a clearer idea of the applicable taxes and penalties.
Income from House Property
Besides property taxes, you might also have to pay income tax on your annual income from your housing property.
Tax is levied only on the net annual value of your house. To compute the net annual value, you can deduct the property tax paid to the municipality from the gross annual value (rent received) of your house. If your property is lying vacant and you are still paying taxes on it, you can offset this loss against income from salary or rent from other properties.
Tax Deductions on Income from House Property
Under the income tax act, you are eligible for several tax deductions on income from housing property. These are as follows and applicable only if you do not live in the only house you own.
- For every homeowner, a sum of 30% of the net annual value is not eligible for taxes.
- If you had taken a home loan while purchasing the property, you can claim tax deductions on the home loan interest paid. The maximum limit for this deduction is Rs. 2 lakh for the self-occupied property regardless of the home loan interest rate and the principal amount borrowed.
- Tax deductions can be claimed on stamp duty and registration charges under section 80 C of the Income Tax Act. These should not exceed Rs. 1.5 lakh.
Buying a house in India can be an expensive affair if the taxes levied on it are not handled expertly, or if the buyer is unaware of the concept of real estate taxes. The above mentioned are the main types of taxes a homeowner or new buyer in India has to pay. Additional taxes can also be levied on your property depending on its location and type. If you feel that you don’t have sufficient money to pay these taxes if you buy an expensive house, utilize a home loan. Compare the home loan interest rates in India offered by different lenders, determine your eligibility, use a home loan EMI calculator to check the EMI payable, and apply for the loan.