What is Property Tax and How is it Calculated?

What Is Property Tax and How Is It Calculated

When you own a property, it’s essential to know what is property tax and how to calculate it. Here is all that you need to know.

With the increment in development and technologies, everything is sustained. Taxes play a crucial role in building the GDP of a country. Taxes also contribute as a primary portion of countries’ fulfilment and development. There are many types of taxes that a citizen needs to pay to the government. Taxes such as:

A common question that comes up in the mind of first-time taxpayers is what is property tax and how is it calculated?

Property tax is a tax paid for the property that an individual has. It is imposed on various property owners that are directly proportional to the number of properties they have. The more properties, the more taxes there will be. It is implied on property owners by municipal authorities like municipal corporations and panchayats in rural areas in India. Authorities collect the tax for the country’s development and the area where the taxpayer lives.

Various services come under tax collection, such as sewage system upgradation, road development, and streetlight placement in the area. It is crucial for the development and fulfilment the essential public services. A country’s development also runs on tax collectors and some other sources. It is common in every country to run the country and maintain its citizens’ services; the main income source is taxes.

Generally, the taxes are paid in two ways: semi-annually or annually by the property owner. An additional fine will be imposed if the taxpayer fails to pay the tax on time. The total amount of tax depends upon the property and various other factors like the location, the total area occupied, etc.

A common doubt among many taxpayers is to compare the difference in taxes with the people living in different cities and regions. The difference in taxes is because of the location. Cities have separate tax payment systems. Posh cities have high taxes, depending on the city’s cost of living. Also, it varies in the intercity as well. High-class societies have to pay more than mid-level societies.

In most places of the country, this tax is the primary source of revenue for the local authorities. The property tax is implemented on commercial and residential buildings, along with the land attached to them. If someone wants to build something on a piece of commercial land, then they also need to pay some tax. Property tax is not applicable on an empty plot until a building is nearby.

Why Is It Important to Pay Property Tax

Property tax is crucial to pay the government to ensure the safety of the estate and its future development. There are high chances of disputes over ownership of the commodity. Third parties usually claim ownership of the possession, so prosperity tax must pay to ensure any means of safety.

After paying the property tax, the owner is free from any disputes made by third-party. In the future, if the chances of a dispute occur, the owner can show the receipt as proof and build their complete ownership.

A property tax receipt is equally important for new buyers once all the dues related to the commodity are paid off.

The most crucial step is to enlist the property with the local municipal bodies such that in the future, there can be no sign of damages to the building by the civil authorities. The owner must do registration. They will ask for the original documents to ensure the ownership with a property tax receipt. A property tax receipt is sufficient to ensure the holding of the building.

There are other documents required to be furnished along with other documents like:

  • Sale deed
  • Clearance from society
  • Address proof
  • Identity proof
  • Duly signed application
  • Property tax receipt

If any owner wants to take out a loan for the property, they need to show the receipt for approval.

Types of properties

There are four distinct categories of properties. Some are as follows:

  • Land plot
  • Modifying the lands to playgrounds and godowns.
  • Personal use for cranes, development, and production plants.
  • Intangible property

These are the property types if someone is planning to make modifications or is about to purchase the land.

Although selling and purchasing a property is a hectic task, it requires various documents and time to fulfil the ownership of the residence.

Why is it Necessary to Pay Property Tax to local authorities?

Everyone needs to pay property tax. It is mandatory to pay property tax to save themselves from any mishap. Property tax contributes to the funds required by local municipalities for providing services such as neighbourhood cleaning, water supply management, and maintaining sewage systems. It gives money to employees who are associated with regional functions.

Failure to pay can invite legal action from the municipal bodies seeking to recover the due amount in any possible way. Sometimes they occupy the assets of the taxpayer.

How is Property Tax Calculated?

For calculating a property tax, some entities are taken while calculating. The entities are as follows:

The Locality

The locality is essential as the cost of living in the locality contributes to the amount of tax paid.

Property Size

Size matters while calculating because a large area occupied means more tax.

Property Status

Generally, female property owners have some discounts as compared to males.

Age of the owner: Senior citizens enjoy the benefits of low taxes.

With inflammation in the country, the tax amount increases whenever the inflammation increases. Formula to calculate the tax:

Property Tax = Base value × built-up area × Age factor × building type × category of use × floor factor.

With this formula, anyone can calculate the property tax alone, and the basic need is to ensure the entities are correct.

Pros of Property Tax

Nobody likes to pay taxes because it burdens them, and sometimes many taxpayers have to cut their desire to pay property tax. However, it has some benefits as well. Several benefits are as follows:

Additional Income for the State

Tax is the foundation of functioning in the country and the state. The amount of tax collected gets directly linked with the expenditure in the state. It generates good revenue for maintaining the development and financing its operations.

Fair Taxation

Taxes are imposed on every citizen. It doesn’t matter what the status is of the taxpayer. Every individual has to pay the required tax to ensure an equal contribution to development. The individual with more assets must pay more tax than those with fewer assets.

Money for Education

Many countries fail to have a proper education system. Due to this issue, the upcoming generation will fail to meet the country’s desires.

A country is building a good education institute for future education by collecting property tax.

Cons of Property Tax

Those who don’t wish to pay taxes will find property tax a burden. Every tax has some disadvantages too. These are:

Low Amount for Buying Property

The amount of tax is an additional payment that everyone needs to pay. If someone has a limited amount to pay every month and meets requirements. They will need more time to arrange money for their desired property. High taxes lead to an adjustment in selecting a property.

High Amount Of Tax Leads to Financial Issues

Only some have enough money to sustain their basic needs and commodities. Everyone wants to buy a house for themselves; only the tax amount stops them from proceeding.

If the tax amount is very high, it will lead to financial crises, which will not only disturb the taxpayer but also become a headache for them.


In short, property tax is a must thing to pay by a citizen, and it ensures the residents’ safety and ownership of the individual. We have an answer to what is property tax and how it is calculated. We can now conclude that property tax is a utility that has to be paid to local authorities annually or semi-annually. It is an amount given to the administrations to ensure society’s development.


Is it mandatory to pay property tax?

Yes, it is crucial to pay property tax as it helps in making complete ownership of a property. It also helps the property owner to remain safe from third-party interference.

What if someone doesn't pay property tax?

Every property owner has to pay taxes depending upon their property size. If someone fails to pay, they will need to face legal action.

How to calculate property tax?

Property tax can easily be computed if the entities are known. A formula for calculating property tax is
Property Tax = Base value × built-up area × Age factor × building type × category of use × floor factor.

Is paying property tax worthy?

It doesn’t matter whether the taxpayer likes to pay taxes or not. Eventually, they will be paying off all the taxes. Property tax is worth it because it ensures much safety for the owners.