Real Estate Taxes vs. Property Taxes

Real estate taxes apply to land and buildings, while property taxes cover personal assets like vehicles.
OPEN FD
Real Estate Taxes vs. Property Taxes
OPEN FD
4 min
25-Feb-2025
Real estate taxes and property taxes are essential aspects of owning real estate, but they serve different purposes. While both involve taxation on land and buildings, their calculation, usage, and applicability vary. Real estate taxes are usually levied on transactions such as buying and selling properties, whereas property taxes are recurring annual charges based on property ownership. Understanding these differences helps property owners manage their tax liabilities effectively. In India, state governments impose these taxes, with variations in rates and regulations. Proper tax planning ensures compliance with laws while optimising financial benefits for real estate investors and homeowners.

Real estate taxes

Real estate taxes are imposed on property-related transactions and ownership transfers. These taxes are primarily collected by state or local authorities and vary based on the property type and location. Below are key aspects of real estate taxes:

  1. Stamp duty – A tax levied on the transfer of property ownership. It is calculated as a percentage of the property's market value and varies across states in India.
  2. Capital gains tax – A tax on profits earned from selling real estate. It is classified as short-term or long-term capital gains tax, depending on the holding period of the property.
  3. Registration fees – Fees charged for legally registering a property sale transaction. This ensures legal ownership transfer and prevents disputes.
  4. GST on real estate – Applicable on under-construction properties, Goods and Services Tax (GST) is imposed on property purchases but does not apply to resale properties.

Property taxes

Property tax is an annual levy imposed by local municipal authorities on property owners. It is based on the assessed value of the property and is used to fund local infrastructure and services. Below are key features of property taxes:

  1. Tax assessment – Property tax is determined based on property valuation, which includes land and building costs. Local authorities assess the property to calculate its taxable value.
  2. Usage-based taxation – The tax rate varies based on property use, such as residential, commercial, or industrial purposes. Commercial properties usually attract higher tax rates.
  3. Payment obligations – Property owners must pay property tax annually or semi-annually to their local municipal corporation. Late payments may incur penalties.
  4. Government revenue allocation – The revenue collected from property taxes funds civic amenities like roads, sewage systems, public parks, and waste management services.

Real estate taxes and property taxes: Differences

While both taxes are related to real estate, they serve distinct purposes and have different applications. Below are the primary differences:

  1. Nature of taxation – Real estate taxes are transaction-based and levied during buying or selling, while property taxes are ongoing annual levies on ownership.
  2. Taxpayer responsibility – Property owners pay property tax yearly, whereas real estate tax is applicable only during transactions, affecting buyers and sellers.
  3. Usage of funds – Property tax revenue is used for local development projects, while real estate tax revenue contributes to state and national revenue collection.
  4. Applicability in India – Stamp duty, registration fees, and GST fall under real estate taxes, while municipal corporations levy property taxes based on property valuation.

Conclusion

Both real estate and property taxes are crucial in property ownership and transactions. While real estate taxes are one-time payments linked to property transfers, property taxes are recurring charges for maintaining civic infrastructure. Understanding these taxes helps property owners and investors plan their finances better. Staying updated with tax laws and complying with regulations ensures smooth property transactions and ownership in India.

Calculate your expected investment returns with the help of our investment calculators

Investment Calculator
FD Return CalculatorSSY CalculatorPPF Calculator
RD CalculatorEPF CalculatorGratuity Calculator


Frequently asked questions

Are real estate taxes the same as property taxes in Texas?
Show More Show Less

Related videos

Bajaj Finserv App for All Your Financial Needs and Goals

Trusted by 50 million+ customers in India, Bajaj Finserv App is a one-stop solution for all your financial needs and goals.

You can use the Bajaj Finserv App to:

● Apply for loans online, such as Instant Personal Loan, Home Loan, Business Loan, Gold Loan, and more.

● Explore and apply for co-branded credit cards online.

● Invest in fixed deposits and mutual funds on the app.

● Choose from multiple insurance for your health, motor and even pocket insurance, from various insurance providers.

● Pay and manage your bills and recharges using the BBPS platform. Use Bajaj Pay and Bajaj Wallet for quick and simple money transfers and transactions.

● Apply for Insta EMI Card and get a pre-approved limit on the app. Explore over 1 million products on the app that can be purchased from a partner store on No Cost EMIs.

● Shop from over 100+ brand partners that offer a diverse range of products and services.

● Use specialised tools like EMI calculators, SIP Calculators

● Check your credit score, download loan statements and even get quick customer support—all on the app.

Download the Bajaj Finserv App today and experience the convenience of managing your finances on one app.

Do more with the Bajaj Finserv App!

UPI, Wallet, Loans, Investments, Cards, Shopping and more

GET THE APP

Disclaimer

As regards deposit taking activity of Bajaj Finance Ltd (BFL), the viewers may refer to the advertisement in the Indian Express (Mumbai Edition) and Loksatta (Pune Edition) furnished in the application form for soliciting public deposits or refer https://www.bajajfinserv.in/fixed-deposit-archives The company is having a valid Certificate of Registration dated March 5, 1998 issued by the Reserve Bank of India under section 45 IA of the Reserve Bank of India Act, 1934. However, the RBI does not accept any responsibility or guarantee about the present position as to the financial soundness of the company or for the correctness of any of the statements or representations made or opinions expressed by the company and for repayment of deposits/discharge of the liabilities by the company.

For the FD calculator the actual returns may vary slightly if the Fixed Deposit tenure includes a leap year.

Show All Text