Over three years after it was proposed,property tax on the basis of capital value was approved by the standing committee of the Brihanmumbai Municipal Corporation (BMC) on Thursday,with minor amendments sought by corporators. The new system was kept pending by politicians owing to civic elections held in February.
Contrary to fears that most properties would see a sharp jump in tax rates under the new system,the civic administration clarified that only 19 per cent of all residential properties (14.2 lakh units) and 25 per cent of non-residential properties (3.77 lakh) would have to shell out more. Also,53 per cent of residential properties will see no change in their present rate while the rate will reduce for 27 per cent properties.
The increase has,however,been capped at a maximum of twice the current property tax paid by residential payers and thrice that for non-residential payers. As part of governance reforms proposed by the state and central governments under the JNNURM,all municipal corporations in the state had to switch to capital value based system of calculating property tax instead of the present system of rateable value (the rental value).
Additional municipal commissioner Rajiv Jalota said property tax bills for 2012-13 onwards would be sent as per the new system with retrospective effect from April 2010. Those charged more since 2010 will be returned the amount with an interest of 6.25 per cent on the additional amount, he said.
He added that the belief that property tax for new buildings would rise sharply is wrong. As per the old system,since rents were frozen we had to keep increasing tax rates,owing to which new buildings had to pay exorbitant property tax. Now the tax rate of new buildings will reduce to as much as half in many cases,both in the island city and suburbs. Another misconception about the new system is that properties in the island city will have to shell out more. The increase and decrease is across the city and suburbs, he said.
The new system was also perceived to cause maximum tax hike for properties in the island city. However,as per BMC data the highest number of properties with tax hike are in the K West ward (50,000 units),followed by H West (34,000 units) and A ward (11,000 units).
The tax can be found by multiplying capital value by revised rate. The number of disputes will reduce greatly. Now,we recover tax from 55 per cent properties since the remaining are disputed. The new system will usher in more transparency and better compliance. We hope that up to 90 per cent properties will now pay up. Total revenue collection will not get affected, Jalota added.
With an annual collection of over Rs 2,800 crore,property tax is the second largest source of income for BMC.