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The Margao Municipal Council has implemented a new capital value-based method for calculating house tax, leading to a significant increase in property tax rates. This change, based on a directive from the Directorate of Municipal Administration, has resulted in over 300% higher taxes for new residential and commercial properties. Under the new system, residential properties are taxed at 0.15% of their annual capital value, while commercial properties face a 0.25% tax rate. The capital value is determined by adding land and construction costs. Existing properties will continue to be taxed under the previous rental value method.
The Margao Municipal Council has recently adopted a new method for calculating house tax, shifting from the rental value system to a capital value-based approach. This change, implemented following a directive from the Directorate of Municipal Administration, has led to a substantial increase in property taxes for new residential and commercial properties. Advertisement
Under the new system, residential properties are taxed at 0.15% of their annual capital value, while commercial properties are taxed at 0.25%. The capital value is calculated by adding the land cost, set at INR 20,000 per square meter, to the construction cost. For residential properties, the construction cost is INR 23,900 per square meter, whereas for commercial properties, it is INR 27,700 per square meter.
This shift from the previous rental value method, which had been in place since the 2018-19 fiscal year, marks a significant change in the tax calculation approach. Under the old system, taxes were based on hypothetical rental income, with certain deductions applied. For a 100 square meter residential property, the monthly rent was estimated at INR 3,000, yielding an annual rental value of INR 36,000. After applying a 7.5% yield and a 10% deduction, the taxable amount was calculated, and the tax was levied accordingly.
The new capital value method, however, calculates tax as a direct percentage of the property's total value, comprising both land and construction costs. This approach has resulted in a significant increase in tax liabilities for new property owners. For instance, the annual house tax for a 100 square meter residential flat has risen from INR 2,000 under the old system to INR 6,600 under the new method, representing a 225% increase. Similarly, the annual tax for a 100 square meter commercial space has surged from INR 2,700 to INR 12,000, marking a 342% increase.
Municipal officials have clarified that the new tax rates apply only to new residential buildings and commercial establishments. Existing properties will continue to be taxed under the old rental value system. This distinction aims to ease the financial impact on property owners of existing buildings while aligning the tax structure for new developments with the current market values.
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