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What is the property tax rate?

The government charges property tax as a levy on the property you own in the country. The state governments decide the tax rates while local authorities are the ones responsible for collecting it.

To assess your property’s tax liability, factors such as the property area and location are taken into consideration. These factors then go into a model which will arrive at a monetary value of all the property that you own and the tax will be levied at that value.

Generally, it can be observed in India that property tax rates tend to be higher in the metro cities as compared to municipalities and panchayats.

Funds raised by local municipal agencies, such as municipal corporations, are used to maintain basic infrastructure. As the local authorities levy this tax, there are differences in terms of fixing, price range, pricing, and mode of payment from one city to another. Properties are classified under 70-80 heads, and rates vary for each head.

You must, therefore, ensure that your property is classified in the correct category. Property tax is levied on the annual rental value of your property. Some local authorities may offer certain property tax exemptions, which are based on circumstances such as location, age, owner's net income, type of property, etc.

For example, if you own a property in Gurgaon then you will have to follow the rates of Gurgaon to calculate and pay your property tax liability. The tax payable on the property is based on two factors i.e. area & use (residential/non-commercial and commercial).

The rate of per sq yard to calculate property tax for residential properties in Gurgaon:

Area (in sq yards)Rate (in ₹per sq yard)
Up to 300 sq yards ₹1 per sq yard
301 to 500 sq yards ₹4 per sq yard
501 to 1,000 sq yards ₹6 per sq yard
1,001 sq yards to 2 acres ₹7 per sq yard
More than 2 acres ₹10 per sq yard

Different localities follow different rules for calculation. In Bengaluru, Karnataka, the property tax is calculated on the 20% of the value of the property multiplied by the per square feet rate fixed by the local authorities and calculated for 10 months. This is then reduced by allowed rates of depreciation by the authorities, and a 24% cess is added to the total property tax liability. Similarly, in Mumbai, the annual value of the property varies depending on whether it is used by the individual for staying himself or rented out. If the property is rented out, the actual rent received in a year is considered for the calculation and if the property is being used by the owner to stay, the value is considered to be zero. But, one must check the property tax liability online as the rules continue to evolve with time and use-cases.

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