How to Calculate Commercial Property Tax?

Commercial property tax is a fee paid to the local municipal body for properties used for business purposes. The commercial property tax calculation depends on factors like location, usage, property size, building age, type of construction, and available amenities such as parking or rainwater harvesting. These elements help determine the final tax amount.Below, I have provided a simple explanation of the three methods municipalities use to calculate your commercial property tax.

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How to Calculate Commercial Property Tax in India?

Here, we can see that municipalities may use one of the following three methods to calculate your commercial property tax

Unit Area Value System

Here, your property tax depends on the size of your space, like how many square feet your office or shop covers. The local authorities set a rate per square foot and figure out how much you might earn from it to calculate your tax.

Capital Value-Based System

In this system, your tax is based on what your property is worth in the market right now. The value changes every year based on where your property is and what kind it is, so your tax adjusts accordingly.

Annual Rental Value System

If you rented out your property, this system calculates tax based on how much rent you could get each year. They look at your property’s location, size, and features to estimate that rental amount.

I hope this helps you.

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How to Reduce Commercial Property Taxes?

I have a warehouse given on rent and that is why I am well aware of how to calculate property tax for commercial property. There is a simple formula to derive the tax amount and calculate property tax for commercial property. You can learn more about it here.

How is Commercial Property Tax Calculated?

The basic formula for calculating property tax is how is commercial property tax calculated where G or the Gross Unit Value is obtained by adding X, Y and Z. Here is what they mean:

• X = the tenanted area of the property * 10 months * per sq ft rate

• Y = the self-occupied area of the property *10 months *per sq ft rate

• Z = the vehicle parking area * 10 months * per sq ft rate

• I = depreciation amount

• H = percentage of depreciation rate that is calculated based on the building’s age

• I = (G*H)/100

Now this formula is for Bangalore. If you want to calculate the property tax in Delhi, here is the formula you need to use:

Property Tax = Annual Value * Tax Rate.

To get the annual value, use the formula:

Annual Value = Unit Area Rate per Square Metre * Age Factor * Structure Factor * Area of the Property * Occupancy Factor * Flat Factor * Use Factor.

These are some formulas you can use to get your answer on how commercial property tax is calculated. Several states have official websites where you can calculate the tax amount to use them as well.

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I have come across many queries related to commercial property tax, including ‘how to calculate commercial property tax?’ Commercial property tax is levied on any property that is used for business purposes/commercial reasons. Keep reading to know more. 

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Generally, Commercial property tax is calculated  by multiplying the taxable value of property with the  Tax rate of the state.For example, if the taxable value of a commercial property is Rs. 1 crore, and the applicable tax rate is 2%, then the commercial property tax would be Rs. 2 lakhs. If you live in Bangalore, you can visit the official website of BBMP and virtually calculate commercial property tax. The steps are given below.

1. 

2. Select the group, assessment year, category, sub group, zone, yera of sontcrution etc.

3. Click on submit

4. The tax amount will be displayed on the screen.

There is a formula to calculate commercial property tax in Bangalore . This formula is as follows –

Property Tax (K) = (G – I) x 20% + Cess @ 24% of the property tax calculated

Where, G = X + Y + Z

and I = G x H/100

In the formula, the values are described as follows –

G = Gross Unit Value which is equal to the aggregate of the following:

1. The tenanted property area x 10 months x rate per square feet

2. Self-occupied property area x 10 months x rate per square feet

3. Area for vehicle parking x 10 months x rate per square feet

4. I = amount of depreciation which is calculated by multiplying the Gross Unit Value with the percent of depreciation applicable on the property. The depreciation rate depends on the property’s age. 

If you have any confusion on ‘how to calculate commercial property tax’, feel free to contact me.