Property taxes can broadly be classified as capital gains tax, tax on movable man made properties, tax on immovable man made properties and on land. It is a form of an ad-valorem tax. Real estate and real property are all combinations on land and man-made improvements or properties on land. Property taxes differ across countries of the world and are only assessed by a proper appraisal of the property by the authorities concerned under the government.
In the Indian administrative tax structure, tax on property comes under the Income Tax Act of 1961, whereby the annual value of any property, consisting of any buildings or lands owned by the assessee will be chargeable under the Income from House Property under the Income Tax law. It should be noted that if part of the property owned by the assessee is used for commercial or profit-making ventures, these will come under the Income Tax bracket, tax on property only being charged for the remaining part of the property, be it the remaining floors of the building or land adjoining to it. Income from vacant or open land does not come under the purview of the Income from House Property under the Income Tax law. Such rents received by letting out open lands or quarry or mine rents will only be assessed under income from other sources.
Even if a company is formed and is let out and a rent is appropriated from the venture, income would be taxed as coming form a house property and not as business income.
g to the rates charged by central government in line with the Finance Act regulations.
Certain incomes from house properties totally exempt from income from property include income from any farmhouse constituting part of agricultural income, income from any warehouse or storehouse for marketing of commodities by an authorized legal body or property income from a corporation, established by the Central or State governments, to promote the interests of the minority community, backward classes or castes.
Property taxes or income from house property is similar to capital gains tax where capital or property, held by an assessee and although not connected with his business or profession is charged under capital gains tax.
Property taxes are levied based upon the current use and value of the land and this is a major source of earning for municipal governments across Canada.
In the case of Hong Kong, there is a tax called the property tax but is not calculated as an ad-valorem tax. It is generally classified as an income tax. According to HK government rules, the tax is only levied if the owner of the property has received a consideration for his property in the year of assessment. Rental income on the land can be taken as a form of consideration. In the more advanced countries of the land such as UK and the USA, while no ad-valorem tax on residential property is calculated for the case of UK, property tax on real estate is calculated by the local government, at the municipality or county level. Tax assessors, a public official with the help of surveyors, calculate the value of real property for apportioning the required amount of tax levy.
In conclusion, property taxes have become more important in today’s world where rental income is enjoyed by many individuals who spend most of their time indulging in speculative activities. But, the word of caution remains: property taxes are largely o a fluctuating nature in the underdeveloped economies and should be evened out for all practical purposes.