Municipal Property Tax: How Property Tax is Calculated

Introduction

If you own a property anywhere in India, you are liable to pay the Municipal Property Tax on it. The amount of tax that you must pay is defined by the Property Tax Act applicable in your state. Herein, you will be required to pay the property tax either annually or semi-annually as per the prevailing rates. To boost the efficiency of the taxation system, various municipal councils now support online payments of Municipal Property Tax. But do you know how property tax is calculated? Read on to learn some crucial aspects about it and also learn how to pay property tax online.

What is Municipal Property Tax?

Municipal Property Tax is defined as the type of tax paid to the government by the owners of any kind of property. Be it a residential property or commercial property, this tax needs to be paid by every property owner. The government uses this fund to offer essential community services, infrastructure projects, schools and colleges, and many other crucial social projects and schemes for the welfare of the citizens.

Property tax is a common type of real estate tax paid by individuals, entities and owners of any type of property. The Property Tax Act was introduced by the government to specify the key aspects related to Municipal Property Tax.

How property tax is calculated?

The property tax is calculated and decided by the local government as well as state governments. Certain factors decide the Municipal Property Tax applicable to a property. Based on the value of a particular property and the area around it, the property tax is determined.

The specific factors affecting property tax might vary across states and municipalities. For instance, the Municipal Property Tax in a metropolitan city of India will be much higher than what is applicable in a Tier-III city or a small country town.

Both central and state laws are considered equally while calculating the Municipal Property Tax in India. Property taxes are evaluated by considering the value of a certain property and the formula specified by the local municipality. A property tax assessor is assigned by the local municipal corporation, who will be responsible for assessing the local properties and updating the applicable property tax every year. If the property tax is not paid on time, there is a provision for penalties and fines in the Property Tax Act. Hence, you must always be aware of how property tax is calculated and how to pay property tax online to avoid these penal costs.

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Types of Properties in India

There are different kinds of properties that are classified into different categories to ease the procedure of Municipal Property Tax. The different types of properties as per the Property Tax Act are mentioned here:

• Land Property: The most common type of property investment in India is a land purchase. Land without any construction or improvement is considered to be fit for investment purposes. These land properties are kept for investment purposes, and the people purchasing these lands are required to pay a specific amount as the property tax on a vacant plot. After the construction is completed, a different rate of Municipal Property Tax will be applicable based on various factors.
• Flats: Apartments and flats are extremely popular forms of property investment in India. Like all other real estate properties, flats and apartments are also subject to relevant provisions of the Property Tax Act. Hence, if you own a flat or an apartment, you must also pay the Municipal Property Tax on it as per the prevailing rules in your region.

Methods to Calculate Property Tax

Now that you know about different types of properties and how property tax is calculated, you must know about the methods to calculate Municipal Property Tax. There are mainly three methods that are used to calculate property tax in India:

Capital Value System

In this method, the property tax is referred to as the percentage of the property's market value. These market values are decided by the government, keeping all the details in mind.

Annual rented Value System

The property tax is calculated based on the rental value of the specific property. This evaluation of a property is conducted based on size, location, and current condition. Other amenities and facilities are also considered while deciding the Municipal Property Tax in this method.

Unit Area Value System

In this method, the built-up area's per unit price of a specific property is taken into consideration. The tax price is decided based on its return value, usage, location, and land price.

The formula that can be used to calculate property tax manually is as follows:

Property Tax= Capital Value * Rate of Tax

 Capital value is obtained by multiplying the base value by the built-up area, usage, building type, age factor, and floor factor.

Capital value = base value built-up area usage building type age factor * floor factor

How to Pay Property Tax Online?

Here are some of the steps to help you learn how to pay property tax online in India:

• Go to the Property Tax website. Click on the payment option.
• You must select the payment mode that suits you.
• You will be taken to a new page where you must enter your property details.
• After you enter the details, you will see information about your property.
• If there are any due taxes, they will also be shown. This is the amount you must pay.
• You will be taken to the payment page, where you must make the payment using the preferred method.
• After you make the payment, download the payment receipt and save it on your system for future reference.

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Conclusion

Payment of the Municipal Property Tax cannot be avoided and is compulsory for every property owner. Different states have different rules and laws when it comes to property taxes. This is the reason for the difference seen in the property taxes in different parts of India. Learn about the real estate laws and taxes on Adani Realty. Adani Realty is considered to be one of the best platforms to get complete knowledge about the real estate sector. They also offer you some of India's best real estate investment options.