Taxing what the rich own
A calculator for a municipal tax on property and a central levy on financial wealth — how much it raises, what it does to prices, and who pays.
Interactive calculator modelling revenue, price effects, and incidence of an annual property tax and a wealth levy in India, with the phasing needed to introduce them.
India taxes labour and consumption. It barely taxes the two things wealth is actually held in: land and equity. Property tax has been stuck at 0.12–0.15% of GDP for decades — half the low-income-country level, a quarter of the middle-income level, one-seventh of the OECD. The wealth tax was abolished in 2015 after raising about ₹1,000 crore a year. Financial assets are only a quarter of Indian household wealth; the other three-quarters sit in property and gold, taxed once at transfer and then never again.
This asset models two levies. One is municipal — an annual tax on property, the only major tax that belongs to cities under Entry 49 of the State List. It is a ladder rather than a flat rate: the home you live in is free, the second unit pays, the third onward pays more. The other is central — an annual levy on financial holdings above a threshold, which sits under Entry 86 of the Union List, the same head the old wealth tax used. Every rate is a slider. The point is not to defend 0/2/5; it is to see what each dial does to three things at once: the money raised, the price of a flat, and the share of the bill that lands on the top decile.
Two honest warnings up front. A tax on a fixed-supply asset capitalises into its price — that is the Georgist mechanism and it is the point of the exercise if the goal is cheaper housing — but it also shrinks the base being taxed, so the revenue and price goals pull against each other. And a flat rate on property is regressive against income for the household whose only asset is one flat; the progressivity has to come from the homestead exemption, the top slab, and the central levy on equity.
The ladder needs two guards or it inverts. A pure count rule taxes three ₹50 lakh flats in Nashik at the top rate and a single ₹15 crore flat on Malabar Hill at nothing — so the model exempts units below a value floor, and caps the primary-residence exemption, above which the home you live in pays the second-unit rate. Without both, the design rewards concentrating wealth into one expensive asset, which is the opposite of the intent.
The finding the model keeps returning is that the headline rate is the least important dial. Once a homestead exemption, realistic assessment ratios, incomplete rolls and price capitalisation are all in, a 2% rate raises about twice today's collections, not fifteen times. What moves the number is the assessment ratio and the coverage of the roll — the administrative dials, not the political ones — and what moves the incidence is the exemption. The rich-versus-everyone question is settled by the central levy, where a few thousand promoter families hold more listed equity than the other twelve crore investors put together.
| Item | Value | |
|---|---|---|
| Financial assets, share of gross household wealth | 25.8% | UBS GWR 2026 |
| Richest 10%, share of household wealth | 65% | Allianz GWR 2025 |
| NSE-listed market cap, Sept 2025 | ≈ ₹446 lakh cr | NSE ownership tracker |
| Held by resident individuals, direct + via mutual funds | 18.75% ≈ ₹84 lakh cr | NSE, Q2 FY26 |
| Promoter holdings (all) | 50.1% | NSE, Q2 FY26 |
| Indian UHNWI: homes owned, and share of wealth in commercial property | 2.3 homes · 22% direct | Knight Frank |
| Urban residential stock at market value | slider, default ₹400 lakh cr | modelled |
| Wealth tax collections in its last year, FY15 | ≈ ₹1,000 cr | Union Budget 2015 |
An annual tax on an asset whose supply is fixed cannot be passed on and cannot reduce the quantity supplied. It reduces the price. If a flat rents for R and buyers demand a yield r, it is worth R/r; add a tax t and it is worth R/(r+t). At a 3% urban rental yield, a 1% levy on market value takes a quarter off prices; 2% takes 40%. This is Henry George's argument from 1879, and it is why the tax has always been popular with economists and unpopular with everyone who already owns.
The forced-sale effect follows from the same arithmetic. An owner who holds a plot empty or a flat locked, earning nothing, now bleeds the levy every year. Holding as a store of value stops being free. Census 2011 counted roughly 11 million vacant urban houses, about 12% of stock, before counting developer land banks and benami plots. That pool either comes to market or starts paying — either outcome is the objective.
Three design choices carry most of the weight. The primary exemption decides whether the middle class pays at all — and its cap decides whether the very rich escape through it. The deferral option — pay via a lien settled at transfer — decides whether the asset-rich, cash-poor household is forced out of its home; without it the levy is politically dead on arrival. And aggregation by PAN is load-bearing in a way it was not for a value-based tax: a ladder counted per property is defeated by registering the second flat in a spouse's name. Counting units per person needs land records linked to PAN, which do not yet exist at scale. Until they do, the third-unit rate is aspirational.
Most ULBs already tax commercial at two to four times the residential rate; it is the part of the property tax that actually works. Excluding it means opening the reform by cutting revenue — toggle it off above to see the hole. It is also concentrated where the proposal is aimed: Knight Frank's Wealth Report puts 22% of Indian UHNWI investable wealth in direct commercial property and another 8% in REITs and funds. A tax meant to reach asset holders that exempts the asset class they prefer is not a serious tax.
Commercial yields run 6–9%, so 5% removes roughly 40% of value — the same damage 2% does to a 3%-yield flat. The rate is not as gentle as the higher yield makes it look. Second, commercial rent is where pass-through is real: the tenant is a business, and the incidence lands on the kirana shop and the small trader rather than the landlord. Third, a 0% primary-residence rate beside a 5% commercial rate is an enormous incentive to reclassify, in cities where mixed use is the norm and assessors cannot finish a roll as it is. The version modelled here applies the same ladder to commercial, with the first owner-occupied premises exempt like a primary residence — the rule turns on use by the owner, not on category, which is what kills the arbitrage.
| Phase | Municipal leg | Central leg | What has to be true |
|---|---|---|---|
| Years 1–2 | 16th Finance Commission grants conditioned on capital-value assessment and annual re-basing of guidance values to transaction data. Public league table of city collections against GSDP. | Budget announces an Entry 86 levy at 0.5% on depository-held assets (demat, MF folios) above ₹10 crore, valued by CDSL/NSDL. Credited against capital gains tax at sale. | States accept the conditionality. Mumbai (capital value since 2010), Bengaluru and Pune are the templates. |
| Years 3–6 | Standard rate ramps from ~0.2% to 1–1.5% with an annual bill-increase cap so nobody gets a fourfold shock. Vacancy surcharge first — it polls well. Homestead exemption and senior deferral in place before the rate moves. | Levy widens to unlisted equity, gold above threshold, and real estate held through companies. Rate to 1%. | Valuation capacity in the top 50 cities. PAN-linking of land records at least in metros. |
| Years 7–10 | Standard rate at target. Top slab on aggregated holdings above the threshold goes live once PAN-linked records exist. | Exit tax on emigration of net wealth above threshold; aggregation rules across family and HUF. | The price adjustment has already happened; banks have re-marked collateral over a decade rather than in a year. |
Getting to the middle-income average of 0.6% of GDP needs only what other countries already have — assessment at market and a complete roll — before any rate rises; the calculator shows the assessment and coverage sliders doing more work than the rate. The base is immobile, the bill is visible, and the link to the road outside is direct: this is the one tax reform that builds local government rather than transfers. Price-to-income ratios of 20–30x in the metros are not a market outcome; they are the untaxed store-of-value premium, and the tax removes exactly that. The central leg reaches the wealth that property tax never will — promoter equity — at valuations a depository already reports daily, which is why it can start next Budget.
A 40% fall in property prices is a balance-sheet event: housing loans are the largest retail book at Indian banks, and recent buyers go into negative equity while sellers who timed it right walk away richer. Most urban local bodies cannot assess a property today — 38% of properties in 23 Karnataka ULBs were unassessed in 2016 — so the tax lands on the compliant and misses the rest. The 2015 wealth tax died because self-declared valuations of illiquid assets are unenforceable; extending the central levy beyond depository assets reopens that. Family-splitting, benami holding, and emigration of the top few thousand households are leaks with no clean fix. And a levy that is credited against capital gains tax raises less than the headline; one that is not roughly doubles the effective rate on equity.
Owners of urban residential property are drawn from a lognormal distribution of total holding value. Units are assigned by wealth rank: the richest slice holds the multi-unit count, the next slice holds two, everyone else one — so unit count and value correlate, as they do in life. Per-unit value is the owner's total divided by their count. The bill is the primary rate on value up to the exemption cap plus the second-unit rate above it, plus the second-unit rate on unit two and the third-unit rate on each unit beyond, with units below the value floor exempt. Everything is scaled by the assessment ratio, by land share if the land-value base is chosen, by roll coverage, and by one minus the deferred share. With “Prices adjust” on, the effective rate on market value is computed, prices scaled by 1 − t/(y+t), and the bill recomputed — three passes to a fixed point. Commercial is modelled in aggregate: taxable stock net of owner-occupied premises, split one-third single-premises and two-thirds portfolio, with its own yield driving its own capitalisation. Equity holders follow the retail lognormal plus a promoter block taxed in full; the credit toggle removes an assumed share of gross. GDP is FY27 nominal. Every figure marked modelled is an assumption, not a measurement, and is exposed as a slider so you can disagree with it.