What is Property Tax and How to Find Out What My Property Taxes are
If you are planning to own a property anytime soon, one of the most important things that you should know is, the property tax. This post will help you understand what it is and how you can find property tax of a particular property.
It is the general notion among Indians that real estate continues to be one of the most rewarding and safest investment options in the country. If you are planning to purchase a property anytime soon, know that apart from the high cost of the property itself, owners are also required to take care of some recurring expenses even after the purchase. For instance, house tax or property tax is one of the most significant recurring costs of owning a property. What is this tax? How is it calculated? Let us have a look:
What is Property Tax?
Property tax is one of the biggest sources of income for the local municipal authorities. It is a tax which is levied on all the different types of fixed tangible assets a person owns. This involves residential property, commercial property, industrial property, and even land with or without improvements or upgrades. In other words, if you own any type of real estate, you’d be required to pay property tax. The money collected by the municipal authorities is then used for providing the basic civic amenities to the residents. As a property owner, you will be required to pay property tax semi-annually or annually.
How Much is the Property Tax?
Now that you’ve got the basic idea of what property tax is, you might be thinking about what is house tax rate. As property tax is a local tax, there is no fixed rate throughout the country. The rate varies between cities, states and even different zones of a city. As the rate is not fixed, different municipal authorities use different methods for calculating the tax.
Factors that Affect Property Tax Rate
While there are different ways to calculate property tax in India, all the different methods do consider a few important factors, such as:
- Location of the property
- Occupancy status - self-occupied or let out
- Type of property - residential or commercial
- Amenities available - car parking, rainwater harvesting and others
- Construction type - single-floor, multi-storied, kutcha house or pucca house.
As there are different types of calculation, there are many different formulas for finding out the property tax of a particular property. One of the most commonly used formulae is as follows:
Property Tax = Property base value x building type x building age x floor factor x usage category x built-up area.
There are fixed multiplicative factors which are used in place of building type, age, floor, and usage category. As manual calculations can get very confusing, you can use an online property tax calculator to find out the exact property tax of your property.
Pay Property Tax on Time to Avoid Penalties
Now that you know what is property tax and how it is calculated, make sure that you always pay the tax on time to avoid any penalties. Most of the municipalities now allow the residents to pay property tax online. You can also visit the municipal office and even a few selected banks to pay the property tax offline.
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