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Rent taxes lead to low supply

mumbai Updated: Mar 24, 2010 01:20 IST
HT Correspondent
HT Correspondent
Hindustan Times
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Harish Mehta (46), a cloth merchant, used to rent his premises at Four Bungalows, Andheri for Rs 50,000 per month until last year. This year he plans to keep the place shut.

The reason behind this is the taxes on rent. Mehta would end up just with Rs 10,000 in his hand, of the total Rs 50,000 rental as the rest is taken up by taxes.

In his case, the civic body will charge him Rs 20,000 (40 per cent) as Property Tax for leasing out the premises while the Income Tax department will charge him Rs 15,000 (30 per cent) and the maintenance bill (10 per cent) of the society will come to Rs 5,000, leaving hardly anything for him.

“It is better to keep the premises shut than rent it for such minimal amount,” said Mehta.

“Taxes play havoc with the rental market. What additional facility is the civic body providing to those who live in leased homes?” asked Vibhoo Mehra, owner, Mumbai Properties, a leading real estate brokerage firm. “There are a fewer transactions, which will hide the real value of the property,” he added.

Housing activists have also flayed the tax. “People are forced to rent a place as the property prices have reached beyond their means. The government cannot do anything on that front and is only burdening them with additional taxes,” said Ramesh Prabhu, Chairman, Maharashtra Societies Welfare Association (MSWA).

However, the civic body has defended the levies. “The tax is reasonable and according to the law,” said N A Pathan, chief, octroi and property tax assessment department, BMC.

“These people are making profits from their premises

and should pay the tax,” said Shreedhar Sharma, president, Revathy Foundation, which works for the housing sector.

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