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IN Tax 2024

iCalculator™ IN: Municipal Taxes Paid

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Municipal taxes are taxes paid to the local municipality on properties owned by you. There is no uniform rate for municipal taxes, as different municipalities have different rates. Municipal taxes are also known as property taxes, house taxes, and municipality taxes.

Municipal taxes in detail

Municipal taxes are calculated on the basis of different factors, which are determined by the local municipality.

Example 1:

Let's take an example of Municipal Corporation of Greater Mumbai. In Mumbai, municipal taxes are determined by a range of factors, some of these are listed below.

  • Municipal ward or locality
  • Whether the property is self-occupied or it is occupied by tenants
  • Year of construction
  • Number of floors
  • Type of construction
  • Carpet area

Example 2:

Greater Hyderabad Municipal Corporation charges municipal tax on the basis of many factors. Some of these factors are mentioned below.

  • Location of the property
  • Type of building such as ordinary reinforced concrete or posh reinforced concrete
  • Use of building -- residential, commercial, shops, etc.
  • Whether you are the owner or tenant
  • Area in square meters
  • Age of the building

Role of Municipal Taxes in rent received

Under Income tax laws, you need to pay income tax on any rental income received. However, before calculating taxes, you can deduct the municipal taxes paid from the rent received to reduce income tax payable.

Example 3: Let's say you receive rent of ₹200,000 every year and pay municipal taxes of ₹10,000. So instead of ₹200,000 you will have to pay income tax on only ₹190,000.

To claim a deduction from income tax, the owner has to pay municipal taxes and not the tenant. If the tenant is paying municipal taxes, owner cannot deduct this amount from rental income.

You can claim a deduction of municipal taxes only on the actual amount paid and not the amount due. So it's better to clear municipal taxes on time to take advantage of the tax benefit.

Example 4: You have received a bill for municipal tax of ₹5,000 in a particular year, but have not paid it. You cannot deduct this amount of ₹5,000 from rental income until you have paid this amount. Suppose in the same year, you pay the municipal tax of ₹4,500 which was due in the previous year. You can deduct this amount of ₹4,500 from rental income.

Use our calculator to check the effect of municipal taxes paid on you tax liability.

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