In India, property tax is collected on all real estate, which consists of improvements made to land, such as buildings or land attached to buildings. Property taxes are nothing but the source of revenue to the government which is used for the improvement of the surroundings.
Every year, the government makes some minor changes and updates the rules for the benefit of both sides.
Important Property Tax Announcements in 2020
Tax Deductions against Rental Property
For taxpayers who have an on-going home loan, the interest paid on such loans helps them lower tax liability in the existing income tax structure. However, under the new income tax regime proposed in Budget 2020, the interest paid on housing loans is not available for a deduction for self-occupied houses.
There is good news for individuals who have rented out their house property. Interest paid on a housing loan taken for a rented out property can be claimed as a deduction under section 24(b) even in the new proposed tax regime.
- The first and most important is to let out your property. Then you can claim the standard deduction of 30% from the net rental income
- After claiming deductions, you can deduct interest paid on the home loan.
Tax Relief Announcement
The government has announced tax relief that will help clear unsold inventory of residential units valued at up to Rs 2 crore.
Buyers have been allowed to purchase homes at 20% below the circle rate without attracting any tax penalties.
- Circle Rate-government– defined value at which property is registered, whereas agreement value is the one negotiated between the builder and the buyer.
Deduction for interest paid on home loan for affordable housing (w.e.f A.Y 2020-21)
Under Section 80EEA as per this rule, the interest paid on the housing loan which is taken between April 1, 2019 – March 31, 2020, was eligible for deduction starting from assessment year fiscal 2020 – 2021.
- The loan should be sanctioned between 1st April 2019 – 31st March 2021
- A deduction for interest payments up to Rs 1,50,000
Karnataka State Updates
- Under the KMC (Karnataka Municipal Corporations) Act, the civic body may only seize movable properties of tax defaulters, that too after issuing three notices. Now, proposed to adopt certain provisions of the Karnataka Land Revenue Act, 1964, that allow the seizing of immovable properties of tax defaulters.
- The last update to guidance values was made in January 2019 wherein the guidance value was increased by 5% to 25%. During the pandemic, it got reduced between 5% and 10%.
What Is The Guidance Value- the base price of properties in a particular area, fixed by the government, property registration can not be done lower than this amount.
- The Urban Development Department (UDD) has directed the Bruh Bengaluru Mahanagara Palike (BBMP) to change the property tax calculation method from the traditional unit area value to the guidance value method. This will likely see a two to five-fold increase in tax collection.
Andhra Pradesh changes to fix property tax
issued a GO promulgating an ordinance changing the system of levying property tax from the annual rental value basis (ARV system) to capital value (CV) system.
Declarations will be as follows:
Residential buildings– Property Tax shall not be less than 0.10% and not more than 0.50% of the capital value
Non-residential buildings– shall not be less than 0.20% and not more than 2% of the capital value (CV)
The New Delhi Municipal Council (NDMC) updates
The New Delhi Municipal Council (NDMC) today had announced a 10% rebate in the Property Tax Bills paid before December 31 and a 5% rebate for payment till January 31, 2021.
The South Delhi Municipal Corporation (SDMC)
The municipal body passed the proposal to levy a professional tax on self-employed persons —doubled the tax on rented commercial property. And SDMC approved this proposal but the amount of tax will depend on the location of the property.
Also announced a hike in tax on the transfer of property in new tax proposals.
State governments collect the property taxes so the few laws and regulations will be different state-wise. We have tried to mention major announcements and updates in 2020.
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