How to Calculate Property Tax?

Property tax is an annual tax that all the property owners have to pay to their local municipal body or the government. Property tax is calculated differently at different locations or municipalities. This means that the tax amount will be different under different municipalities for a similar type of property.

In this blog, we will learn about all the different methods of calculating property tax.

Standard Formula for Calculating Property Tax

Even though the exact method for calculating the property tax is different for different municipalities, there is a standard formula for calculating the same-

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

Note that this is a general formula that can be used to calculate tax on a property. However, as mentioned already, the exact method may be different for different municipalities. Let’s take a look at some of the methods used to calculate property tax.

Different Methods to Calculate Property Tax

In general practice, one of these three methods is used to calculate the property tax.

Capital Value System (CVS): The property tax is calculated as a percentage of the property’s total market value under the Capital Value System. The market value of the property is calculated by the local administration such as the municipal body or the local government, depending upon the locality. CVS is used to calculate the property tax in Mumbai.

Unit Area Value System (UAS): The property tax is calculated based on the per-unit price of the built-up area of the property under the Unit Area Value System (UAS). The per-unit price is calculated based on the expected returns of the property which further depends on the location, land price, usage etc. This value, when multiplied by the total built-up area of the property, gives the property tax amount as calculated by UAS. This method is followed in Delhi, Kolkata, Patna, Bangalore, Hyderabad etc.

Annual Rental Value System or Ratable Value System (RVS): The property tax is calculated on the annual rental value of the property. This need not be the actual rent obtained from the property but the rent evaluated by the municipality based on location, size, condition of the property etc. This type of valuation is used in Chennai and some parts of Hyderabad.

Interest Rates on Property Tax

One can attract interest in the property tax if he/she fails to pay it on time. This interest rate may differ from one locality to another. It generally ranges from 5% to 20% depending on the policies of the state or the municipality.

So, you must note that if you fail to pay the tax on time, then the late payment of your property will also include an additional interest charge apart from the principal value of the property tax.

FAQs
What is the standard formula for calculating property tax?
The standard formula for calculating property tax is as follows:

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

What are some of the common methods of calculating property tax?
There are three methods of calculating property tax-
  • Capital Value System (CVS)
  • Unit Area Value System (UAS)
  • Annual Rental Value System or Rateable Value System (RVS)
Can I check my property tax amount online?
Yes, you can check your property tax amount online. Follow these steps to check property tax online-
  • Go to ‘www.paytm.com‘ or download the Paytm mobile application
  • Visit the ‘Municipal Payment page’
  • Select your municipality and enter your property number
  • Click on ‘Get Tax Amount’ to check the property tax amount online
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