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What is Property Tax and how is it calculated?

What is Property Tax and how is it calculated?

What is Property Tax and how is it calculated?

As a responsible citizen of India, you must pay your taxes. All taxes collected by the government are used towards the development of the country. New infrastructure, better transportation systems and public facilities, all are provided based on the taxes paid by the citizens of the country. One of the most common taxes that properties owners have to pay is known as the property tax. Whether you own a flat, a bungalow, a farm house or a piece of land you need to pay your share of taxes for owning the property. But what does it mean and how to calculate property tax? Let's find out.

Property tax – meaning and definition

Property tax is a term used to refer to the funds collected by municipal corporations of different towns and cities from property owners residing within the town or city. This tax is then used for the development of the locality in which the property exists. For instance, the tax amounts are used towards the maintenance of roads and civic facilities such as parks, street lights, drainage systems around the properties and so on. The municipal corporation levies this tax on a half-yearly or yearly basis, depending upon the rules and regulations of the area levying the tax. The payable tax amount varies from one location to the other.

Property tax calculation – the important factors considered

To calculate property tax, the following important factors are considered.

  • The built-up area of the property
  • The construction period
  • Structure of the building or property
  • The location in which the property is constructed
  • The type of property – flat, villa, bungalow etc.

City-wise property tax calculation

How to calculate property tax in Mumbai

Property owners in Mumbai must pay their taxes to the Brihanmumbai Municipal Corporation (BMC). The corporation here adopts the CVS or Capital Value System to calculate the property tax. The value of the tax levied varies annually, based on the occupancy status of the property. Essentially, the BMC considers the below mentioned parameters while calculating property tax in Mumbai

  • Occupancy type – self-occupied or rented
  • Ward Number
  • Usage of the property – residential, commercial, industrial or land
  • Zone and or sub-zone
  • Type of building – kuccha structure, semi-developed or luxurious
  • Age of the building
  • Floor and Floor Space Index
  • Water Connection

As such, the property tax calculator uses the following formula to calculate the tax amount

Property Tax = Base Value × Built-Up Area × Age Factor × Type of Building × Category of Use × Floor Factor

The BMC also allows you to pay your property tax online. You can visit if you reside in the Municipal Corporation of Greater Mumbai (MCGM area, whereas residents of Navi Mumbai Municipal Corporation (NMMC) can pay their taxes on

How property tax is calculated in Delhi

The Municipal Corporation of Delhi or MDC uses the Unit Area System for the calculation of property taxes in Delhi. Here, the tax amount calculation is done on the basis of:

  • The property’s built-up area
  • The period of construction
  • The structure of the property
  • The location of the property
  • The Type of property - residential, commercial, industrial or land

Varying tax rates as applicable on the type of property

  • If your property falls under the residential categories A or B, you pay a 12% property tax on the total cost of the property.
  • If your property falls under the residential categories C, D or E, you pay an 11% property tax on the total cost of the property.
  • If your property falls under the residential categories F, G or H, you pay a 7% property tax on the total cost of the property.

The following formula is adopted by the civic bodies to calculate property tax in Delhi.

Property tax = Annual Value X Rate of Tax

Residents of Delhi can simply log on to pay their property tax

Now that you know how to calculate house tax, you can easily pay your property tax. Note that every city’s corporation follows more or less the same above mentioned specifications for calculating property tax. The amount payable also depends upon whether you are living in a metro, tier I, tier II or tier III city.

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