New property tax plan postponed

The civic body’s plan to change the structure of property tax is unlikely to take off in the next fiscal year, reports Bhavika Jain.

The civic body’s plan to change the structure of property tax is unlikely to take off in the next fiscal year.

HT Image

The municipal corporation had planned to switch over from the existing rateable value system — based on rent — to calculate property tax to a capital value system — based on market price of the property.

The mandatory reform under the Jawaharlal Nehru National Urban Renewal Mission, was to be implemented from April next year but will be delayed by at least six months.

According to civic officials, data required to facilitate the conversion is yet to be digitalised.

“We need to survey properties across the city and record their area as per the new structure to calculate property tax. The survey will take more than six months,” said N.A. Pathan, chief assessor and collector.

The other issue is that the Brihanmumbai Municipal Corporation (BMC) is yet to appoint surveyors for the proposal.

Currently, residents of Mumbai are being charged property tax on the basis of the rental value of their properties. The property tax ranges between 30 per cent and 40 per cent of the annual rental that a property can fetch.

However, there is a major drawback in this system that leads to an uneven tax structure.

The tax is disproportionately less in the island city as the buildings there fall under the Rent Control Act under which the rents of properties have been frozen since 1940.

On the other hand, residents in suburbs pay more as those areas are not covered under the Rent Control Act and rents there are charged as per market value.

“To rationalise this structure, the BMC had proposed a capital value-based system for charging the property tax, which would hinge on parameters such as age of the property, its nature of construction and whether it is residential or commercial property.

The state Legislature has already approved the new structure.

“The department currently has information on only 50 per cent of the 3.54 lakh properties which pay taxes regularly to the BMC,” said Pathan.

“We will try to tabulate all information and aim at changing the system from October,” he added.

Once the structure is changed, the residential properties up to 500 sq ft area in the island city will be exempted from a hike for the first five years, after which it could be hiked. The hike will not be over 40 per cent of the last tax amount paid.

Properties with more than 500-sq-ft area might see a 100 per cent rise.

In the suburbs, property tax bills could see a rebate between 25 and 30 per cent. Civic estimates say there are about 3.5 lakh properties in the city and its suburbs.

The municipal corporation does not have any record for over 1 lakh properties.

The BMC plans to impose property tax on slums for the first time.