Mumbai’s Property Tax Conundrum: BMC’s Rs 10,899-cr tax claim based on complex formula and overrides HC, SC orders

This is not a case in isolation as the BMC has sent several such notices to buildings and establishments demanding significantly higher property taxes than what they were paying. Civic body’s records show that as of August 2025, as many as 481 different properties in Mumbai have pending property tax dues amounting to Rs 10,899.96 crore, including penalty on the unpaid component of taxes.

Reason for the dues: In 2010, the BMC introduced a new formula to calculate and implement property taxes — based on potential Floor Space Index (FSI) or the maximum buildable area. After the civic authorities proposed it, multiple parties challenged the methodology of calculating and imposing property taxes. While the Bombay High Court in 2019 quashed the new methodology, even the Supreme Court upheld the High Court’s decision in 2022.

Notwithstanding the court order, the BMC continues to send high property tax bills based on a new formula —  100% tax amount as per the rateable value was added along with 50% of the proposed CVS (Capital Value System) value.

As it sends the bills under this formula, the footnote of the bill stated that the bill has been issued on a protective basis.

“We wrote to the BMC immediately after the receipt of the notice, pointing out that they had sent an inflated bill. We are well aware of the court’s ruling that came in 2022, and have been paying taxes accordingly,” Cornell Gonsalves — a resident of Annavista CHS told The Indian Express.

Even as the BMC continues to calculate property taxes on this newly devised formula, BMC Commissioner Bhushan Gagrani is of the view that the property tax should be calculated on the base value of the land.

Speaking to The Indian Express, Gagrani said, “In my opinion, the property tax of any property on a land parcel should be determined on the base value of the land. The SC questioned BMC’s method of calculating the property tax on a land parcel and I am already carrying out correspondence with the state government to formulate a proper GR that would determine a permanent establish policy to calculate the property tax rates.”

Gagrani also stated that while there were talks about filing a review petition challenging the SC’s 2022 order, no such review was filed and the SC order is implemented.

The commissioner also said that if the tax is calculated on the existing formula and penalties are quashed, the property tax outstanding will come down significantly. “The overall outstanding figures include penalty amounts and tax rates calculated as per current methodology of combining 100 per cent of old rateable tax rate and 50 per cent of the proposed CVS system. If the government chalks out a policy of calculating tax rates on the basis of base value of a property and the penalties are quashed, then only 25%-30% of the pending amount will be actually outstanding.”

Till March 31, 2025, the civic body collected Rs 6,172 crore or nearly 99.54 per cent of its estimated property tax target of Rs 6,200 crore for the 2024-25 financial year. This, however, was a significant jump of nearly 30 per cent from the previous fiscal, when it had collected Rs 4,856 crore in property taxes.

2010 formula

Till the mid 2000s, the BMC used to calculate property tax on the basis of rateable value of a property — an estimated annual rental income used by local authorities — to calculate the tax rates of a structure or an open land. In 2010, the civic body proposed a process called a Capital Value System (CVS), under which, the BMC attempted to fix the tax rates of a property on the basis of a primary three standard system.

One of the major components of this methodology was calculating the tax on the basis of potential Floor Space Index (FSI) or the maximum buildable area that could be built on a particular plot. For example, if an open space of land has the potential for accommodating 12 floors on it, while in actual it has a property on it with only six floors, the tax rates would be calculated on the basis of 12 floors instead of six – thus putting an extra load on the tax payer’s shoulders.

As the CVS system met opposition and legal challenges and the Bombay HC quashed the BMC’s proposition in 2019, stating that the existing physical qualities and state of the land and building should only be considered to determine ‘capital value’ and instead of the prospects of the land. Following this the BMC moved the SC, and in 2022 the apex court too upheld HC’s decision.

Irrespective of SC’s decision, the BMC kept calculating property tax on a third formula — 100% tax amount as per the rateable value added along with 50% of the proposed CVS value. Under this formula, if a resident had to pay Rs 1,000 as property tax under the old system till 2009, and if under the new CVS system the new tax rate stood at Rs 3,500, then the taxpayer wil have to pay Rs 2,500 — Rs 1,000 from the old rateable system along with 50 per cent or Rs 1,500 under the proposed CVS system.

A footnote in property tax bills issued by the civic body, however, clarifies the scope of retrospective evaluation.

“According to the court decision, Rule no 20, 21 and 22 under Rules for Fixing Capital Value of 2010 and 2015 have been set aside. The concerned bill (as above) has been issued on protective basis and Corporation’s right of retrospective evaluation/revaluation of properties and tax collection, once the revised policy for evaluation is announced, is reserved,” read the footnote on the property tax bill.

Former corporators also questioned the bills, saying the calculation is contempt of the SC and HC order. “The current property tax bills are being generated in an ad-hoc manner and the BMC’s footnote justifies that. This case is a direct contempt of the court,” said Asif Zakaria, former BMC corporator, who raised this issue in several civic committee meetings between 2017 and 2022.

List of defaulters

The BMC records show pending property tax dues from 481 properties in Mumbai, with the overall outstanding amount at Rs 10,899.68 crore, including penalties, and Rs 5,784 crore, excluding the penalties.

Among the institutions whose name appears in the BMC’s defauters list includes government authorities, insolvent companies and private contractors that have leased out land parcels for setting up casting yards and back offices for infrastructure projects.

When The Indian Express contacted top 30 defaulters as per BMC list (who owe in excess of Rs 100 crore), while some chose “not to comment” on the issue, others maintained that they have been paying taxes as per the old methodology or they have been wrongfully included in the list.

As per the list Mumbai Metropolitan Development Authority (MMRDA) has been put up as the biggest defaulter by BMC with total outstanding of Rs 714.31 crore. When contacted, MMRDA didn’t respond to the queries however, a senior official said, “Most properties on which property tax has been imposed by BMC include Metro stations, bridges and casting yards that are involved with the construction of many large infrastructure projects in Mumbai. It is unfair to impose tax on these properties.”

Private infrastructure company, J Kumar Infraprojects, which has an outstanding of Rs 564.76 crore as per BMC’s records, also did not respond to the queries.

The BMC’s record shows that the real estate companies Housing Development and Infrastructure Limited (HDIL) and DBS Realty owe Rs 410 crore and 419 crore respectively in property tax. Shadab Jan, advocate for HDIL, said, “The disputes regarding distribution under plans and during liquidation regarding statutory dues are a burning issue pending before various forums. However, the upcoming amendments to the Insolvency and Bankruptcy Code (IBC) will provide the much needed clarity and hopefully settle the dust on these issue once and for all.”

Queries sent to DBS Realty didn’t elicit any response.

BMC’s data also showed a large amount of outstanding dues on Mumbai Metro Rail Corporation Limited (MMRCL) and several big-ticket contractors that are involved in the construction of Metro projects. For example, an individual tax amount was imposed on MMRCL, while a tax amount of Rs 124 crore was imposed on the contractors Hindustan Construction Company and Moscow Metro Story that are involved in the Metro works. Similarly Rs 119 crore was imposed on the consortium of Continental Engineering Construction (CEC), ITD Cementation India and Tata Projects Limited (TPL) that executed the now operational of the Mumbai Metro’s aqua line, while Rs 118 crore was imposed on Dogus-Soma consortium that are also involved in the Metro project.

When contacted, MMRCL spokesperson said that since the property tax matter is sub-judice, the organisation will not give any response, while HCC said that the said demand is untenable.

“Under the provisions of the Railways Act, 1989, read with the Metro Railway (Construction of Works) Act, 1978, railway yards and works constructed for the purpose of, or in connection with, a railway are expressly exempt from any tax liability. This issue is industry-wide in nature. In 2024, HCC, along with other contractors engaged by MMRCL for the execution of Metro Line 3 (Aqua Line), challenged this unjustified levy before the Hon’ble Bombay High Court. The Hon’ble Court has granted a stay on the recovery of the alleged tax, and the matter is presently sub judice,” it stated.

Several prominent clubs are also on the defaulters list.

BMC’s challenges

As the BMC is looking to shore up finances amid execution of large scale projects, the civic administration has chalked out multiple policies, including leasing of BMC’s land to private parties and selling of housing tenements, to generate additional revenue. According to BMC records, the civic authorities in November 2024 attached 10 properties worth Rs 557 crore that belonged to 10 different defaulters. Of these properties, two belonged to J Kumar infra. In October, the BMC also announced auctioning of four properties in Mumbai to recover property taxes amounting to Rs 120 crore.

“One of the key reasons that our department faces is that there are not enough staffers, who can carry out attachment and enforcement of defaulter’s properties. Also, owing to the long pending legal ramification, many of these cases are pending at the courts as well as NCLT for which recovery is due,” an official told the Indian Express.

The official also added that besides collecting taxes, officials with the assessment and collection department, responsible for property taxes, are also involved in election duties since 2024 — first, it was the Lok Sabha elections, then state Assembly and now the local body elections.