It is categorised based on the type and use of the property – each with its distinct calculation methods and rates. The primary types of property tax include:
1. Residential Property Tax: This tax applies to properties used for residential purposes – such as apartments, row houses, and villas. The tax is generally lower for residential properties, as the usage is primarily for living spaces. Municipal bodies calculate this tax based on factors like the size of the property, location, and the amenities available.
2. Commercial Property Tax: It is levied on properties used for business activities – including offices, shops, malls, and industrial units. Since commercial properties generate income, they often attract higher tax rates compared to residential properties. The calculation considers the property’s usage, income potential, and its location within the city.
3. Agricultural Property Tax: To support farming activities, many states offer exemptions or reduced rates for this tax. However, the tax structure can vary, with some regions imposing tax only on non-agricultural use of the land.
4. Vacant Land Tax: Undeveloped plots or vacant land tax, also fall under the purview of property tax. To discourage land hoarding and promote development, municipal authorities may levy taxes on vacant plots. The tax rate can vary based on the land’s potential use and location.

Property tax calculation in India is influenced by various factors such as location, property age, size, usage, valuation methods, and tax slabs, which together determine the annual tax liability.
1. Property Location: Properties in urban areas or prime locales – such as city centres or near major commercial hubs – typically attract higher taxes compared to those in rural or less developed areas. The infrastructure, amenities, and demand in a particular location also contribute to the tax rate.
2. Property Age: Older properties may be eligible for depreciation benefits, reducing their tax liability. Conversely, newly constructed properties may be taxed at higher rates, due to their current market value and modern amenities.
3. Property Size and Built-up Area: Larger properties or those with extensive built-up areas are taxed more heavily than smaller units. The calculation considers both the land area and the total built-up area, including additional structures like gardens or backyards.
4. Property Usage (Residential, Commercial, etc.): The purpose for which a property is used – whether residential, commercial, agricultural, or industrial – significantly affects the tax rate. Commercial properties generate high income, hence face higher tax rates compared to residential properties. Agricultural properties often benefit from lower rates or exemptions, depending on state policies.
5. Property Valuation Methods: Different municipalities may use varying methods to assess property value, such as the Capital Value System (CVS), Unit Area Value System (UAS), and Annual Rental Value System (ARVS). Each method calculates the property’s worth based on factors like market value, rental income, or unit area – influencing the final tax amount.
6. Tax Slabs and Rates: Property taxes are often structured in slabs, with varying rates applied based on the property’s value or usage type. Higher-value properties may fall into higher tax slabs, resulting in a progressive increase in tax liability. The specific tax rates and slabs are determined by local municipal authorities and can differ from one city to another.