Ordinance waives property tax on flats smaller than 500 sq ft
Ordinance will effectively means anyone with residential property up to 500 sq ft won’t have to have pay annual property tax to the municipal corporation
MUMBAI The Maharashtra government on Monday promulgated an ordinance to waive property tax on residential properties up to 500 square feet in Mumbai. The ordinance will be implemented with retrospective effect from January 1, 2022. It effectively means anyone with residential property up to 500 sq ft won’t have to have pay annual property tax to the municipal corporation.
According to a Brihanmumbai Municipal Corporation (BMC) estimate, there are over 160,000 residential properties in the city that will benefit from the decision, while the civic body will face an estimated annual revenue loss of ₹500 crore.
“Due to the current rising inflation, the increased property taxes levied by the Municipal Corporation of Brihan Mumbai (BMC) are not affordable to the people residing in such houses. Also, due to Covid-19 pandemic, many businesses in the Mumbai city have been closed and many people lost their jobs and sources of livelihood. Therefore, it is difficult for the people to pay the property tax. There is consistent demand from the people to exempt the residential area of 46.45 sq m (500 sq ft) or less from the property tax,” states the ordinance issued by the state urban development department on February 2.
In order to implement the decision, the state government made amendments in three laws — Mumbai Municipal Corporation Act, Maharashtra Education and Employment Guarantee Cess Act and Maharashtra (Urban Areas) Protection and Preservation of Trees Act.
“The BMC has also passed a resolution, for not to levy property tax on such small residential buildings or residential tenements. Therefore, it is considered expedient to amend section 140 of the Mumbai Municipal Corporation Act and section 18 of the Maharashtra (Urban Areas) Protection and Preservation of Trees Act, 1975 and to insert new section 7A in the Maharashtra Education and Employment Guarantee (Cess) Act, 1962, so as to provide that, from the January 1, 2022, BMC shall not levy any tax component of property tax, on the residential buildings or residential tenements, having carpet area of 46.45 sq. meter (500 sq. feet) or less,” the ordinance added.
An ordinance is issued to make a temporary amendment in a law for implementing a specific decision. It can be brought when the state legislature is not in session. The ordinance has a shelf life of six months. Once a session begins it has to be converted into a law within six weeks by the state legislature to prevent it from lapsing.
The announcement to waive property tax is part of a poll promise made by the Shiv Sena in the run up to the BMC elections held in 2017. In 2019, the erstwhile BJP-Sena government led by then chief minister Devendra Fadnavis made the required amendment with a rider that the waiver would only be limited for the general component of the tax, which is 10-20% of the total. But last year it clarified that it would issue property tax bills to owners of such structures, with a partial waiver. The partial waiver only included the general tax component.
There are nine other components, including water tax, water benefit tax, sewerage tax, sewerage benefit tax, general tax, education cess, trees cess, street tax and betterment charges that the property owners are required to pay. The fresh ordinance ensures full waiver from property tax to the residential property owners.
Property tax is among BMC’s biggest revenue sources. It collects between ₹4,000-5000 crore in property tax annually and the outstanding amount is usually around ₹1,500 crore. With this waiver, the civic body is likely to face an annual revenue loss of up to ₹500 crore.
Under the current system, property tax is levied collectively for a building. But the BMC since last year has also started issuing property tax individual flats. For now, both are being followed. There are around 400,000 housing societies in the city.
In the financial year 2020-21, BMC had estimated property tax collection to be ₹6,738 crore but could mobilise only ₹4,500 crore due to the Covid-19-induced lockdowns. The next year, BMC projected property tax collection estimates at ₹7,000 crore but revised it to ₹5,400 crore and ultimately to ₹3851 crore until January. For 2022-23, the civic body has again projected property tax collection of ₹7,000 crore.