Property Tax Calculation – How to Calculate Property Tax?

Published On February 23, 2020 | By admin | Business

A property tax is a charge levied by the local municipal body, which you must pay every year. The tax is applicable for all kinds of properties that you may own be it land, an office building, or a residential premise. Read on to know about how the property tax is calculated.

The government levies a property tax on all the real estate properties that individuals own. The property could be residential homes, office space, the land, and other properties that you may have rented to a third party. It is an annual expense that all homeowners are obliged to pay. In India, the property tax amount may differ from one city to the other. The tax collected by the local municipal body is used for development and maintenance of basic civic amenities including parks, sewage, public schools and roads.

Presently, in India, the property tax is paid on the real property, including the land and the improvements made on the land. With the government revising the monetary value of such properties and assessing the tax in proportion to the market value, the municipal body of the area determines the applicable property tax. So, if you own a home in India, apart from your home loans payments, you must also pay the property tax every year. Properties are classified into four categories that help the government to estimate the tax.

The different types of property divisions are:

  • Land in its basic form without any improvements or construction made on it
  • Improvements made to the land include immovable humanmade creations like godowns or buildings
  • Personal properties including movable items like busses, cranes and cars
  • Intangible properties

How Is Property Tax Calculated?

In India, the property tax varies depending on where the property in question is located; the tax differs from state to state and city to city. Different municipal bodies use different methods to determine the tax, but the general structure of calculations remains the same.

While assessing the property tax, the civic authorities first determine the area where the property is located, they also look at the occupancy status (whether the property is rented out or self-occupied by the owner). The authorities also look at the construction year, what kind of construction (whether it is a single floor structure, a multi-floored one or a kutcha structure).

Once the above parameters are determined, the civic authorities typically use the following formula to calculate the tax:

Property Tax = base value x build-up area x age factor x type of building x category of use x floor factor

The tax on the property will vary based on the above factors, and you can easily compute it online through the official website of the local municipal body.

How to Pay Property Tax Online?

Paying property tax is easy. You must follow the below steps:

  • Visit the official website of the city cooperation
  • Select the option that indicates property tax and navigate your way through to the payment option
  • Choose the right kind of form based on the suitable category under which your property falls and choose the assessment for which the tax must be paid
  • Next, you will be required to fill the property identification number and furnish details of other property-related documents
  • Once, you have entered the necessary information, select the appropriate payment mode and pay
  • Lastly, make sure to get a printout of the challan or the receipt of the tax payment for future reference

Note: The above steps could vary depending on the city corporation

Interest on Property Tax

If you forget to pay the property tax for any assessment year or if you fail to pay within the deadline, the city corporation levies an interest penalty, which is generally a certain percentage of the due amount. The interest is different in different states, but the charges range between 5% to 20%.

You must be diligent about the property tax payment to avoid paying the penalty.

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