South or suburbs, one rule for assessing property tax……..Shweta Desai
Residents of South Mumbai will now have higher property tax assessment while those in the suburbs will see a reduction in taxes following the passing of the Bill to allow the Brihanmumbai Municipal Corporation to collect taxes based on the capital value of properties. Mumbai will finally switch from the rateable value-based collection of property tax, under which tax is assessed on the rent a property can earn.
The reforms are expected to finally rationalise property tax collections South Mumbai, where rents are frozen by the Rent Control Act, has until now paid comparatively lower property tax than suburban residents. If approved by the Brihanmumbai Municipal Corporation, the new rules will come into force by July.
However, for the next five years, properties smaller than 500 sq feet will enjoy an exemption from the new system. There will also be relief for properties owned by the physically handicapped, women and senior citizens. Revisions in this structure will be carried out after five years when exemptions are withdrawn and all properties assessed at par based on their capital value, while also factoring in points like the age of a building, land use purpose, etc.
It is estimated that commercial properties will pay three times the existing taxes. Those South Mumbai properties that currently pay the lowest tax may see a 100 per cent rise, while suburban residents could see a 20 pc to 25 pc fall in tax bills.
The bill, which was introduced in the state legislature in 2006 and finally cleared by the lower house in 2008 was finally approved by the upper house on Thursday. The Mumbai Municipal Corporation Act will now be amended to make way for the reforms.
Additional Municipal Commissioner Anil Diggikar said the civic administration would immediately initiate the process for implementation of the capital value based system, which is expected to double property tax collection for the BMC coffers. In the next two months, the guidelines and rates proposal will be placed before the Law, Revenue and General Purposes Committee, the Standing Committee and the General Body for final approval, he said.
The civic administration will also release a set of Business Rules that will list around 65 types of properties that assessed properties will be categorized into. It will also prepare a draft for the rates at which property tax will be calculated. However, it will be corporators in the Sena-BJP controlled BMC who will approve the rates of taxation for the island city and suburbs.
Under the new system, tax will be based on the market rates of property in that area as designated by the Ready Reckoner.
Some elected representatives, especially those elected from South Mumbai, continue to oppose the new system. MLA Mangal Prabhat Lodha, also a builder, said: This is injustice to the people staying in South Mumbai and residents will move court against this bill.
Sena MLA Diwakar Raote said the Ready Reckoner rates, till now used by the government only for calculation of stamp duty, cannot be used for property tax assessment. The use of the Ready Reckoner rates could be subject to litigation, he said.
Then & Now
* Before the Rent Act came into force (until 1946), tax for the entire city was calculated at 11 per cent of rateable (rent-earning) value. After 1947, when rents were frozen, the BMC kept on hiking tax rates to increase its revenue.
* Rates have jumped from 11 per cent to 112.5 per cent (for commercial properties) and 83.5 per cent (for residential properties) of rateable value.
* Since suburban rents were not under Rent Control, the result is a disparity between the tax assessment in the island city and that in newly formed suburban areas.
* Experts believe the new tax system will be transparent and bring in a uniform structure, without differentiation between the people of South Mumbai and those of the suburbs. President of the Property Lessors Association Rajendra Mehta said the new system will bring in rationalisation. There was irregularity in the tax system as there were a few paying more than others and a few paying less. Now the system will be same for everyone and will be more affordable to the middle class, he said.
URL: http://www.expressindia.com/latest-news/south-or-suburbs-one-rule-for-assessing-property-tax/436798/