How To Calculate Property Tax For Real Estate in India?

Table of Contents

1. What Are the Types of Property in India?

2. How Property Tax is Calculated in India?

3. How to Pay Property Tax in India?

4. What is the Interest Rate on Property Tax?

5. How Can You Claim Exemptions on Property Tax?

What Are the Types of Property in India?

Government has streamlined the property in India into four categories as it becomes easier to estimate the tax. Here are the property divisions:

1. Land: Land should be in its rawest form without any construction or improvisation on it
2. Improvements made to the land: Immobile constrictions on land that are man-made like godowns and buildings
3. Personal property: Movable man-made vehicles like cards, buses, trucks, cranes, etc.
4. Intangible property: Possession of 'untouchable' objects like royalties and patents.

How Property Tax is Calculated in India?

In India, property tax calculation differs from state to state. There is no thumb rule as various formulas as used to calculate tax in India. The tax calculation takes into consideration many factors like type of property, location of the property, occupancy status (self- occupied or rented), floor and carpet area, number of floors constructed, etc.

The prime methods used in India for tax calculation are as follows:

1. Capital Value System: The finance Capital’s (Mumbai) municipal authorities calculate the tax using this formula. In this system, the tax is imposed on the percentage of the market value of the property. The state government depending on the location of the property, determines the market value of the property on yearly basis and make it public on various platforms

2. Unit Area Value System: Municipalities in Kolkata, Delhi, Patna, Bengaluru, etc. use this system to calculate tax. The tax is levied calculated on the per unit prices of the property’s built-up area. Furthermore, the per unit price is calculated on the basis of its usage, location and land price. Also, determine the actual tax amount, the per unit price calculated is multiplied with the total built-up area of the property

3. Annual Rental Value System: Also known as the Rateable Value System, this method is used by cities like Chennai and Hyderabad to calculate tax. Under this system, the yearly rental value of the property is taken into consideration to calculate tax. Also, rental value of the property is not calculated on the basis of the rent collected on the property, but it is a value that is decided by the municipal authority on the basis of the size, amenities, location and landmarks around the property

How to Pay Property Tax in India?

You can pay the property tax at the municipal corporation office of the area in which your property is located. Also, many municipalities tie up with various banks that accept the property tax payment. With India moving towards a fully digitalized nation, many municipal corporations are also collecting taxes online on their official websites. While paying the property tax online, you need to keep the property tax number or katha number of the revenue survey number handy.

What is the Interest Rate on Property Tax?

The interest on a property tax is applicable only when an individual is unable to pay the tax on time. The interest rate charged on a property tax varies from state to state and is equal to a certain percentage amount of the tax due. Usually, the percentage of interest rate on a property tax varies from 5 to 20%.

How Can You Claim Exemptions on Property Tax?

When there are taxes, there are also exemptions. Therefore you can also have exemptions on property tax on a few factors, some of which are listed below for your perusal:

1. Age (if you are a super senior citizen)

2. Location (if your property is constructed in famine zone or similar areas)

3. Your net income

4. Type of property

5. Your history of serving the public

Also, if you own a vacant plot of land, you don’t have to pay the property tax. To know more, you will have to get in touch with either municipal corporation or concerned administrative authority of your locality.