Homeowners in Faridabad are set to see a big change in how their property tax gets calculated, and it could mean that two identical houses end up with two very different tax bills. Under the new system, the tax will no longer depend only on the size of the plot, it will also depend heavily on the collector rate of the colony the house stands in.
How the new formula works
According to Faridabad-based advocate Manish Parashar, the government has worked out a fresh formula to calculate property tax. The first step is arriving at what is called the capital value of the property. This capital value is obtained by multiplying three factors together, the collector rate, the plot area and something called the floor factor. Whatever figure comes out of this multiplication becomes the capital value of the house, and the taxable amount is then calculated on that basis.
Why the same size house may not mean the same tax
Parashar explains that every colony and sector in Faridabad has its own collector rate, and since the collector rate now sits at the centre of the formula, two houses of identical size can end up paying different amounts of tax simply because they are located in different colonies. Wherever the collector rate is higher, the tax bill for houses in that colony or sector is likely to be higher too. In effect, it is no longer just the size of a house that decides the tax, the neighbourhood it sits in now matters just as much.
The floor factor rises as the house grows taller
The new rule also takes the number of floors into account. If a house has only a ground floor, its floor factor is counted as one. As more floors get added on top, the floor factor keeps rising along with them. Because this floor factor is directly multiplied into the capital value calculation, adding a floor can push up the final tax amount. Whether it is a two storey house or a three storey one, every additional floor can add to the tax burden.
Earlier, only the plot area decided the tax
Under the old system, Parashar says, property tax was worked out purely on the basis of the plot area, and the collector rate, or what is also called the circle rate, played almost no part in it. That is why, across different colonies of the city, houses of the same size ended up paying roughly the same tax, whether the colony was an upscale one or an ordinary one. With the collector rate now forming the basis of the calculation, that uniformity will disappear, and the tax for every colony and sector will move according to its own collector rate.
An extra charge for rented-out houses
The most direct impact of the new rule will fall on homeowners. Those who live in their own houses will simply pay tax under the new formula. Tenants, on the other hand, will not feel a direct hit, but a separate rule has been set for owners who have rented their property out. The government has decided that an additional charge of 0.25 percent will be levied on houses that are given out on rent. That means owners who rent out their property could end up paying somewhat more tax than those who live in their own homes. This is exactly why anyone holding property in Faridabad now needs to understand how the new tax system works and how much of a dent it could put in their pocket.
