Every municipality or state has its commercial property tax calculation method, so visit their website to get an idea of the details of how to calculate commercial property tax. However, here are some general pointers about how the calculations are conducted.
Commercial property tax is calculated based on some of these factors:
- Location of your property
- State of occupation, whether it is self-occupied, rented, or vacant
- Commercial usage of the property
- Available amenities such as a provision of a car park, store, or rainwater harvesting
- Construction type, whether multi or single storied
- Age of the construction on the land
- Floor space index
- The carpet area of the property
These are some factors based on which the commercial property tax is calculated around municipalities across India.
Municipalities may also use any of the following three methods to calculate your commercial property tax. These three methods are as follows:
Unit area value system
Under this system, the per unit area of the total carpet area or the built-up area is first determined. Based on this acreage, the expected returns are calculated. Commercial property tax is then calculated on these expected returns.
Capital value-based system
Under this category, the main factor is the market value of a commercial property. Firstly, the local government will calculate the market rate for the property based on the location and type of property. This rate undergoes revision every year. We then calculate tax on the market rate.
Annual rental value system
This system decides tax based on the rent that property owners can earn from it. We calculate the tax based on the rent you would receive on the property. Authorities will look at the location, amenities, size of the property to arrive at the tax value.
Every municipality in India uses any of these three ways to decide how to calculate commercial property tax. You can also easily find a commercial property tax calculator for your particular municipality and find out how much tax you owe on the property. However, most commercial properties will have a taxation scheme more or less similar to normal property tax.
Municipalities in Mumbai and Bangalore have a commercial property tax calculator. You can check them out on their respective websites.