How is property tax calculated?

Everyone pays property tax, but few know how to calculate it. Read on as we delve into the subject

Taxes apply to everything. From a toothbrush to a car, you must pay taxes for whatever you buy. Real estate is no different, with property tax applicable on residential and commercial properties. The amount varies in proportion to the value of the property. In this article, we will discuss house tax, including what is property tax and how property tax is calculated.

What is property tax?

The annual sum payable by a landowner/property owner to the city administration of his/her area or local government is known as property tax. All concrete real estate properties, including the individual's home, workplace facility, and property leased to others, are subject to property tax or house tax in India. 

It also draws conclusions from the appraised value of the property. The money raised by the property tax is used to develop local infrastructure, such as roads and school upkeep, road repairs, and so on. Property taxes are divided between cities and municipalities, as well as between different parts of a city.

How is property tax calculated?

House tax is calculated based on the following factors:

• The state or municipal government, the nature of the property, and so forth.
• Different civic corporations use different calculation methods.
• Accurate information about the neighbourhood, the status of occupancy – rented or self-occupied, the type of property – land, residential, commercial, infrastructure provided, floor and carpet space, the number of floors in the building, and so on.

When you enter the needed information correctly on the municipal corporation's website, the property tax amount can be determined.

The formula used to calculate property tax is:

Property tax = Starting value × vertical area × age factor × type of building × purpose of use × floor area

It is vital to remember that the amount of tax due in India is determined by the location of the property, as taxes differ from state to state. Civic companies use different methods to assess the tax amount owed. However, the overall picture of such calculations is the same. Late payments of property tax are subject to additional costs, such as a fine, which vary by state. Late payment penalties ranging from 5% to 20% can be waived or reduced depending on state policies.

Tax rebate on home loan interest

If the proprietor or his/her family lives in the residence, they can seek a rebate of up to ₹2 lakhs on their home loan interest rate. The same rebate principal is applied if the house is not in use. The entire home loan interest can be deducted if the home has been rented out.

The interest reduction is restricted to ₹30,000, instead of ₹2 lakhs, if these circumstances are fulfilled:

1st condition

The home loan was obtained on or after April 1, 1999, and the acquisition or development was not concluded within five years of the end of the fiscal year in which the loan was obtained.

2nd condition

The loan was taken prior to 1999.

3rd condition

The loan was acquired on or after April 1, 1999, for the sake of house repairs or renovation.

Know all about the relation between home loans and property tax. IDFC FIRST Bank also offers reasonable interest rates on home loan, which saves money. Depending on factors such as your CIBIL score and income, you can get loans up to ₹5 crores. TheThe loan tenures are also flexible, ranging from 12 to 360 months. You can apply through an Instant Loan App.

Disclaimer

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