Rented commercial properties in Mira Bhayandar to be taxed more

MBMC officials said that according to the 15th Finance Commission, if the tax revenue is not increased by 20% from last year, the corporation will not receive the grants from the commission. Hence, they have to find ways to generate more revenue

Mumbai: In order to generate more revenue, the Mira-Bhayandar Municipal Corporation (MBMC) has decided to increase property taxes on commercial properties that have been leased out by their original owners.

A shopkeeper who has rented the property said, “The MBMC already has a lot of taxation on the businesses. With this new rule it will become impossible to run small businesses here. The property owners will increase the prices to match with what they are currently getting as rent and the shopkeepers renting it will bear the brunt. (Azim Tamboli)

The MBMC has decided to start implementing its February 2018 resolution where rented commercial properties will be taxed at least 20% of its rent amount as property tax. The civic body in 2018 passed a resolution that commercial properties rented by the owners will have to pay 20% of the rental amount or ₹10 per square feet, whichever is higher as property tax.

The aim of the corporation is to generate more revenue through this and tighten the grip on owners not paying property taxes. The MBMC has now started sending notices and surveying properties to gather the data for the same and also requested the data from the stamp duty registration office. Officials said this will not lead to an increase in rental prices as increased rentals mean further increases in taxes.

Sanjay Shinde, deputy municipal commissioner, MBMC, said, “In Maharashtra, except BMC, the property tax on commercial properties is usually based on rental value instead of the property value. In 2018, the standing committee of MBMC passed a resolution that those property owners who have rented their property should be taxed more. According to this, the property tax will be 20% of the rental value or ₹10 per square foot whichever is higher.”

“There will be two rates, those who are using the commercial property for their own business will be charged based on the current valuation and ready reckoner rate. Those who have rented it, their property tax will be based on the 2018 resolution,” Shinde added.

Shinde further explained that this is to tighten the grip on tax evaders, “They used to make two types of agreement where they would only charge a minimum amount as rent on paper, and the remaining would be in cash. Now, we have asked the stamp duty office to give us the data on all rented properties in the city. Then we will clearly know how many properties are on rent.”

MBMC officials said that according to the 15th Finance Commission, if the tax revenue is not increased by 20% from last year, the corporation will not receive the grants from the commission. Hence, they have to find ways to generate more revenue.

The officials said the new property tax calculation is likely to increase revenue by ₹15-20 crores annually.

Tejas Shah, one of the property owners who has rented his property, couldn’t believe the implementation of this resolution at first. “This is utterly shocking that they want to levy a 20% tax on the rental agreement. The property owners are not able to break even at the current market price and the increased tax will worsen the situation. The cascading effect of this will be those renting the properties” he said.

Rakesh Singh of the Mira Bhayandar Property Dealers Welfare Association said, “This will lead to an increase in the rental prices of commercial properties across the city. People who have purchased commercial properties as an investment and want to rent it out, even they will be affected.”

Singh said the association will be meeting the new municipal commissioner soon and request to not implement this as running businesses in the city will become difficult.

A shopkeeper who has rented the property said, “The MBMC already has a lot of taxation on the businesses. With this new rule it will become impossible to run small businesses here. The property owners will increase the prices to match with what they are currently getting as rent and the shopkeepers renting it will bear the brunt.”