The document explains the differences between property tax and wealth tax in India, with property tax being levied on real estate by local authorities for community services, while wealth tax, a direct tax on total net wealth, was abolished in 2015 due to administrative challenges and low revenue yield. Property tax is calculated based on the assessed value of properties using various methods, while wealth tax applied to individuals with net wealth exceeding Rs 30 lakh. The article also outlines reasons for abolishing the wealth tax, such as encouraging investments and simplifying the tax system.

1. What's The Distinction Between Property And Wealth Tax?
Both mobile and immovable asset classes are subject to taxes, which support
government spending. It can be confusing to navigate India's extensive tax system,
particularly when attempting to discern between wealth tax and property tax.
Despite their apparent similarity, the terms refer to different aspects of financial
portfolios. Both mobile and immovable asset classes are subject to taxes, which
support government spending. The purpose of this article is to explain the
distinctions between wealth tax and property tax as well as their distinct functions
within the Indian tax system.
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What exactly is property tax?
Property owners are subject to property tax, often called house tax, which is levied
by municipal entities such panchayats, municipalities, and municipal corporations.
The money raised by this tax is set aside for the upkeep of neighbourhood features
including parks, roads, drainage systems, and other infrastructure. Property tax is
not applicable to vacant land that has no linked real estate structure, and it applies
to both residential & commercial properties, including land attachments &
renovations.

2. What is the definition of a wealth tax?
The wealth tax is a direct tax imposed on a person's own possessions and is
regulated by the Wealth Tax Act of 1957. With the adoption of the Union Budget in
2015, India stopped enforcing wealth tax, which was originally intended to create
equity among taxpayers of different income levels. The change took effect for the
2015–16 fiscal year. Rather, it now seems as a tax on people who make more money.
According to the Union Budget of 2019, the income tax surcharge was increased to
10% for individuals earning more than Rs 50 Lakh annually and to 15% for total
income over Rs 1 Crore.
How is the property tax calculated in India?
Property tax is assessed based on the assessed value of the property and is
determined by the local bodies. Property taxes are calculated using three main
methods: The Unit Area Value System (UAS), the Rateable Value System (RVS) or
Annual Rental Value System, and the Capital Value System (CVS). While UAS is the
recommended technique in cities like Delhi, Kolkata, Patna, and Bangalore, RVS is
used in places like Hyderabad & Chennai, and CVS is frequently used in Mumbai.
How is the Indian wealth tax calculated?
When an individual, business, or Hindu Undivided Family (HUF) has total net wealth
that exceeds Rs 30 lakh on the valuation date, they are subject to wealth tax. When
the value exceeds Rs 30 lakh, the appropriate tax rate is 1%. If a person's net worth
above this limit, they must file a report of net wealth, and the deadline for filing this
return coincides with the income tax return.
Why was India's wealth tax abolished?
A number of events led to India's wealth tax being abolished in the 2015–16 Union
Budget:
Administrative challenges: The wealth tax system required a lot of administrative
work and was complicated. Accurate appraisal of various assets led to many
disagreements and administrative difficulties.

3. Encouragement of investments: The wealth tax was repealed in order to reduce
taxes for taxpayers and encourage investment. Removing this tax, according to
policymakers, would promote economic expansion and make wealth generation
easier.
Low revenue yield: Considering the amount of administrative work needed, the
wealth tax's revenue was very little. The tax's financial advantages were outweighed
by the costs of introduction and enforcement.
Key distinctions between property tax & wealth tax
Criteria Property tax Wealth tax
Nature of tax Tax on the ownership of real
estate (land, buildings)
Tax on an individual’s total net
wealth (assets – liabilities)
Abolition Still in existence Abolished in India from FY2015-
16
Assets taxed Real estate assets All taxable assets, including real
estate, jewelry, cars, among
others.
Calculation
basis
Assessed value of the
property
Net value of all taxable assets
Revenue focus Local government revenue
for public services
Central government revenue for
reducing economic inequality
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