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Staying as PG? Get ready to pay more

MCD asks people providing paying guest accommodation to pay property tax at commercial rates, reports Neelam Pandey.
Hindustan Times | By Neelam Pandey, New Delhi
UPDATED ON JUN 09, 2008 11:57 PM IST

Staying in a paying guest accommodation in the Capital may soon become a costly affair for scores of students and young working professionals. With the MCD’s decision to charge property tax at commercial rate, landlords in the city are planning to increase rent.

At present the residential properties are taxed 6 per cent property tax of the annual value of the vacant land in categories such as F, G and H. In posh colonies, which are classified under categories A, B, C, D and E, the rate is 10 per cent. The civic body has decided to charge property tax at the rate of 10 per cent as per the commercial rate.

This means that if one pays Rs 4,600 as property tax for a 200 square metre plot in Amar Colony for residential use, at commercial rate the owner would have to pay Rs 18,400.

“The owners of paying guest accommodation need to pay property tax according to commercial rate. These owners have been paying tax at residential rate. They are not using their property for self-use but are making profit out of it. It is a commercial venture so they should pay tax at commercial rates,” said Vijendra Gupta, chairman of the Standing Committee of the MCD.

Gupta said some of these PG owners make as much as Rs 20,000 from one room. “In a posh locality, each paying guest pays about Rs 5,000 for a room he shares with four people or more. The minimum the owner makes is about Rs 20,000 per room. They are running dormitory and charging huge sums in rent. There is no reason why they should get away ith paying so less tax,” said Gupta.

MCD officials said they would start charging the enhanced property tax from such PG owners from June end. “If they fail to pay property tax by June 30, random checking will be carried out by the MCD staff. Punitive action will be taken against those who fail to pay the commercial rate,” added Gupta.

Those offering PG accommodation said if the MCD insists on charging property tax on commercial rates, they would have no choice but to hike their rents.

“We have been running this PG for many years and the rent is quite reasonable. But if the MCD asks us to pay property tax according to commercial rate, we will be forced to raise the rent,” said Naveen, who runs a PG hostel for Delhi University students in Hudson Lane.

“We treat paying guests as our own children. We offer them cheap accommodation and give them all the

facilities they would get at home. Students and young women feel secure living with us. They get home cooked food. Can a rented accommodation provide all these facilities? There is no reason why the MCD should charge us tax at commercial rate. But if they insist on doing it, we will be forced to hike our rents,” said Saroj Malhotra who runs a PG at Vikram Vihar, Lajpat Nagar-IV. She has about 20 girls living in her two-storied building.

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