Tax
What is Property Tax?
The bill that arrives every year for as long as you own the flat — and the arrears that follow the property rather than the person who ran them up.
The short answer
Property tax is the annual levy your municipal body charges on your flat. It funds roads, drains, street lighting, waste collection.
How it's calculated varies by city. Bengaluru uses Unit Area Value. Hyderabad uses Annual Rental Value. Mumbai uses Capital Value.
And the thing that matters most when buying: arrears attach to the PROPERTY, not to the person who ran them up.
What property tax is
An annual tax, levied by the municipal corporation, on whoever owns the property. It pays for the things a city does: roads, drainage, street lighting, waste collection, parks.
You pay it every year, for as long as you own the flat. It is not large — usually a few thousand to a few tens of thousands of rupees a year — but it is permanent, and it compounds.
The three methods
| Method | How it works | Used by |
|---|---|---|
| Unit Area Value (UAV) | A rate per square foot, set by zone, multiplied by the built-up area, adjusted for use and age | Bengaluru (BBMP), Delhi, Kolkata, Patna |
| Annual Rental Value (ARV) | Based on the notional annual rent the property could fetch — whether or not you rent it out | Hyderabad (GHMC), Chennai |
| Capital Value System (CVS) | A percentage of the property's market value, using the ready reckoner rate | Mumbai (BMC) |
The method matters. Under ARV, a flat in an area where rents have risen sharply sees its tax rise, even if you never let it. Under CVS, tax tracks the ready reckoner rate — so a revision to that rate raises your tax bill.
City by city
- Bengaluru (BBMP): Unit Area Value. Six zones, each with its own rate per sq ft. Self-assessment, filed annually. A rebate for early payment.
- Hyderabad (GHMC): Annual Rental Value, based on a monthly rent per sq ft for the locality. Half-yearly payment.
- Mumbai (BMC): Capital Value System, a percentage of market value derived from the ready reckoner rate.
- Chennai (GCC): Annual Rental Value.
- Pune (PMC): Capital Value based.
- Delhi (MCD): Unit Area Value, with colonies grouped into categories A to H.
All of these can now be paid online, and all publish a calculator. Look yours up before you buy — it is a running cost you will carry for decades.
The arrears trap — the thing to check before you buy
The previous owner didn't pay for six years. They have sold you the flat and moved on.
The arrears are now your problem. The municipality's claim is against the property, and you own it.
This is not a theoretical risk. It is one of the commonest unpleasant surprises in Indian resale purchases.
Before you buy — resale or new:
- Ask for property tax receipts for the last five years. Not one. Five.
- Verify them on the municipal portal, against the property ID. Do not rely on the paper.
- Get a no-dues certificate from the municipality if you can.
- Check the name on the receipts matches the seller.
- Withhold part of the price until the dues are cleared, if there is any doubt.
- After you buy: apply for mutation — so the bill starts coming to you rather than accumulating quietly in someone else's name.
Rebates and deductions
- Early-payment rebate. Most cities offer 5% or so for paying in the first month of the year. Free money; take it.
- Online payment rebate, in some cities.
- Concessions for senior citizens, ex-servicemen, women owners, and people with disabilities, depending on the city.
- Vacant land is usually taxed at a lower rate than built property.
- Let-out property: the municipal tax you actually pay during the year is deductible from your rental income under the house property head. Keep the receipts.
Most Indian cities offer a rebate — often around 5% — for paying the whole year's property tax in the first month.
It is the easiest saving available to a homeowner, it takes ten minutes online, and most people forget and pay in November.
We have written this against the current position and checked it carefully. But tax turns entirely on your specific facts: your residential status, when you bought, when you sell, which regime you are on, and what else is in your return.
Note also that the Income Tax Act, 2025 now replaces the 1961 Act, and section numbering is changing even where the substance is not. We use the familiar numbers — 54, 54F, 24(b), 80C — because those are what people search for and what CAs still say. Confirm the current section references with your accountant.
Before you sell a property, pay a CA. On a transaction this size it is the best-value fee you will ever pay, and the cost of getting it wrong runs to lakhs.
Frequently asked questions
How is property tax calculated in India?
It depends on the city. Bengaluru uses Unit Area Value — a rate per square foot by zone. Hyderabad and Chennai use Annual Rental Value — based on the notional rent the property could fetch. Mumbai uses the Capital Value System — a percentage of market value derived from the ready reckoner rate.
Who pays property tax arrears when a flat is sold?
In practice, the buyer — because the municipality's claim attaches to the PROPERTY, not to the person who ran up the arrears. If the previous owner didn't pay for six years and has sold you the flat, the arrears are now your problem. Ask for five years of receipts, verify them on the municipal portal, and get a no-dues certificate.
Is property tax deductible from income tax?
For a let-out property, yes — the municipal tax you actually PAY during the year is deductible from rental income under the house property head. Keep the receipts. For a self-occupied property there is no such deduction.
Can I get a discount on property tax?
Most Indian cities offer a rebate — often around 5% — for paying the full year's tax in the first month. There are also concessions in various cities for senior citizens, women owners, ex-servicemen and people with disabilities. Paying in April rather than November is the easiest saving available to a homeowner.
What happens if I don't pay property tax?
Interest and penalties accumulate, and the arrears attach to the property. Municipalities can and do attach properties for long-standing dues. It also becomes a problem at resale — a careful buyer's lawyer will ask for five years of receipts.