Property Taxes: Everything You Need to Know

Kishan Thakkar K

What is Property Tax?

Property tax is the annual amount paid by a landowner to the local government or the municipal corporation of his area. The property includes all tangible real estate property, his house, office building, and the property he has rented to others.

The property tax levied on tangible real estate properties and is a major source of revenue for the government. The term “property” refers to all tangible real estate under the ownership of an individual. This includes houses, office buildings, premises rented to other parties, etc.

The rate of the tax usually varies between municipal authorities across India. The municipal corporation assesses each area and determines the property taxes annually or semi-annually. The amount of tax depends on the area, construction, property size, building, etc.

Types of The Property Taxes

Property in India has been divided into four classifications.

1. Personal property

Portable man-made property. For example, cars, buses, and cranes

2. Land

Land in its most basic form, devoid of any form of construction

3. Improvements and upgrades made to land

Tangible Man-made constructions

4. Intangible property

Properties that do not have physical substances. For example, patent, copyright, royalties, etc.

Calculation of Property Tax

The calculation of the property taxes varies based on several factors as listed below:

○ Location

○ the state/municipal corporation

○ State of occupancy (rented or self-occupied)

○ Type of property – Residential or Commercial

○ Floor area, carpet area, built-up area, Floor Space Index, etc.

○ Age of the property

The formula used for calculating property tax is as below:

Property tax = base value × built-up area × Age factor × type of building × category of use × floor factor.

It is important to note that the amount of property tax is based on where the property is located, the assessment method of a particular municipal corporation, building use, age of the building, etc. The tex amount varies from municipal to municipal across India, but the evaluation method remains the same as above.

Different Method to Calculate Property Tax

1. Unit Area Value System

This system calculates the taxes based on the per-unit price of the built-up area of a property. The tax slab per sq. ft. depends on the expected market value of that property. This system is used for the calculation of property tax by the AMC.

2. Capital Value System (CVS)

This system calculates the property tax from the percentage of the market value of a property. The government decides the market value based on the locality and other factors.

3. Annual Rented Value System

This system calculates the property tax on the rental value of the property. The gross annual rent of the property is fixed by the municipal body.

FAQ

1. Is property tax decided by the government?

Answer: The property tax is charged by the Government and the owner of real estate are bound to pay that. The tax amount is assessed and collected by local governing bodies or Municipal corporations.

2. Should the tenant pay the property tax?

Answer: No, you don’t have to pay the Local property tax if you are a rent-paying tenant and your lease is for less than 20 years.

3. What is the preferred payment for property tax, online or offline?

Answer: Both are preferable, the only thing you need to keep in mind is to pay before the due date.

4. How to pay taxes if I use one floor to run my business and another as a house?

Answer: The floor used as a house will be treated as a self-occupied house property. The floor used to run the business will not be taxed under “Income from house property” but it shall be taxed under the “business profession” head.

5. Would you like an expert to help you?

Answer: Yes. Get advice and suggestions on the property tax from experts. Please write down all your doubt related to the property taxes.

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