What is property tax and how is it calculated?

Property Tax Calculation

Property tax calculation can be easily understood if you follow the handy guidelines mentioned in the article. Property taxes have to be paid by every property owner and you should clearly understand the methods behind their calculation although this differs from one State Government to another.

Property Tax Calculation

Wondering about property tax calculation? You can always use a land tax calculator or any other property tax calculator online or at the website of your requisite municipal authority or local authority that collects these taxes. Understanding the calculation methods behind property taxes is something that is sometimes quite challenging for property owners in India. This tax is charged by the local State Government upon the real estate that you personally own. There are several aspects which influence property taxes including the base value, floor factor, type of building, category of use, age factor and built-up area along with the locational aspects. Occupancy status is another factor that has to be taken into context.

Calculation methods for property taxes

Property tax is calculated in the following ways:

  1. Annual Rental Value or the Rate-able Value or ARV

In this system, the gross annual property rent is fixed by the local municipal body and taxes imposed likewise upon the basis of this estimated annual value. Rateable value is dependent on the property size, area/location, proximity of the property to particular landmarks, condition of the property and amenities. If you were to calculate the same, the monthly rental value will be important since this will help at working out the annual value.

Hence, the property tax formula here will be monthly rental value- plinth area x basic rate per sq. ft. and annual rental value- monthly rental value x 12- 10%. This system is followed in New Delhi.

  1. CVS or Capital Value System

This property tax formula takes into account the property’s market value for estimation of payable taxes. This is fixed by the stamp duty department. This system is followed in Mumbai. The formula is property tax- base value x age factor x built-up area x type of building x floor factor x category of use.

  1. UAS or Unit Area System

This system is based upon returns expected from a property, depending upon its usage and location. Since the calculation unit is based upon per square foot per month and for a specific location/street, it is multiplied by this rate. This system is used for calculating property taxes in New Delhi, Hyderabad, Bangalore, Patna, Kolkata and Ahmedabad among many other cities, i.e. fixing a price for per unit value of an area.

The property tax calculation formula will be annual value- covered area x age factor x unit area value x use factor x occupancy factor x structure factor.

You can readily pay your property taxes at your local municipal corporation office or even online and also at designated banking institutions, depending upon your particular city. You may have to give the property tax number or even the Khatha number for identification of the property in question. These days, most municipal corporations have digitized the payment procedure for property taxes and you can view your taxes online for the particular period and then pay them securely online. You can simply download and print out your property tax receipt likewise. Rebates and exemptions may also be provided by some municipal bodies or authorities, depending upon several factors. Property tax has to be annually paid and late payments may attract fines through interest on the amount which is due. This can go up to 2% each month. It is also vital to note that the responsibility of paying property taxes lies completely with the property owner and not occupants of any property, i.e. tenants or lessees.


Also read : Property Tax Ludhiana Online Payment