Top Five Reasons for a High Property Tax Bill

Punjab, Pakistan: Have you been shocked by receiving a property tax bill that seems much too high, with a due date that's much too near? You would like to understand the reason behind this excessive bill, but you don't have the time to figure it out, and you're tempted to just pay it to avoid penalties, surcharges, and other penal actions like closing or sealing of your property. The good news is that you can find the top five reasons behind a painfully high tax bill right here:

Reason 1: Tax is not only for one year

The most common reason behind an outsized property tax bill is arrears of property tax. Arrears of property tax are the taxes due on a property for past years, rather than the current year. Taxes for more than one year can obviously make the property tax bill a lot higher than you were expecting. For example, a tax of Rs 3, 240 per year is not high, but it will add up to Rs 32, 400 if not paid for ten years. In addition, penalties and surcharges will also apply on arrears of property tax.

The best strategy in such cases is to pay the tax in installments. However, the Excise and Taxation Department may refuse to accept installment payments of the tax.

An alternative – but not often successful – strategy to cope with the situation is to file an appeal if you feel the Department has not correctly recorded the property.

Reason 2: Tax is of previous owner

A second common cause of an overlarge property tax bill is basically Reason 1 in disguise. The difference is that you are not aware of existence of property tax arrears, because you had the misfortune to buy your property from a seller who did not tell you about property tax dues outstanding against the property at the time of sale. 

If this is your situation, you'll probably want to visit Why should I pay property tax arrears of a previous owner?

Reason 3: Previous owner rented the property, and you did not get it switched to owner-occupied status

The third common reason for a big property tax bill is still another version of the first. It happens when you buy a property from a landlord – someone who was renting the property out. He paid the tax regularly, but you bought the property and moved in, you did not get the property reassessed by the Excise and Taxation Office in a timely manner.

Now that you're aware of the issue, you'll want to get the property recorded as an owner-occupied property in the tax records. You will have to submit an application for it.

Reason 4: Property is owner-occupied, but is recorded as rented property

The above status issue can be a problem even if you didn't just buy your property. If your property is owner-occupied but has been recorded as tenant-occupied property in the tax records, your property tax bill can be ten times higher than it should.

Again, the best strategy here is to get the property recorded as an owner-occupied property in the tax records by submitting an application.

Reason 5: The Excise and Taxation Department has re-assessed the property

The fifth common reason for a higher property tax bill is re-assessment of your property. This often happens when you are paying less property tax on a property which is tenant-occupied. The Department detects this, assesses the property accordingly, and sends you a higher bill.

In such cases you'll normally have no choice but to pay the tax. However, you may prefer an appeal if the property tax bill is too high and unjustified on the face of it.

In addition to the above reasons, you should know how the fundamental calculation of property tax is made. Property tax is calculated by applying a tax rate to the value of a property. If the value of your property is Rs 100 and the tax rate is 20%, you should get a property tax bill of Rs 20. The Punjab government conducts surveys and changes tax rates from time to time to respond to budgetary needs, inflation, and other factors. However, there has been no change in tax rates for about ten years. Property tax rates will remain the same for the year 2014.

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