Taxing time

GET THAT REBATE

Several rebates on property tax payment are available. First,as mentioned above,there is the rebate for timely payment of property tax. Second,some state governments,including Delhis,offer a concession to senior citizens,ex-service personnel,women,and the physically challenged. Some state governments also offer relief on property tax to first-time home buyers. This is their way of encouraging home ownership.

HOW THEY CHARGE

There are three methods to calculate property tax: annual rental value,capital value,and unit area. Delhi has adopted the unit area method,which was recommended by the Central government. K S Mehra,MCD commissioner,says,We have updated our systems in order to present a consumer-friendly face. To provide transparent,accountable and efficient services to Delhis citizens through the use of information technology,the Property Tax Division of MCD has initiated an innovative approach of public-private partnership PPP.

To facilitate the process of tax payment,MCD has created a web site: http://www.mcdpropertytax.in . The form for filing property tax is available at this website. Also available is an online calculator that helps you estimate your tax liability.

Delhi has been divided into eight categories. The amount of tax you pay per unit area depends on the category that you belong to,with higher-end colonies where property rates are higher being charged more.

SYSTEM UPGRADE

In recent times,the municipal corporations in most of Indias leading cities have overhauled their property tax collection systems to international standards. Bangalore,for instance,has introduced the capital value method for computing property tax. The Nagpur Municipal Corporation is the first local government in India to make the record of its five lakh properties available online for the purpose of property tax search and online tax payment.

Property tax collection in the top 10 Indian metros is now extremely efficient,thanks to the computerisation of the system. In many of the larger cities,property tax is calculated on the basis of rentable value. The ready reckoner rates required for this are updated regularly in the larger cities, says Mitra of JLLM. He adds that there is still a degree of inefficiency in tier II and tier III cities. Lack of computerisation,outdated ready reckoner rates,and a lower level of compliance among owners are some of the key reasons.

While there is a considerable amount of challenge involved in converting archaic property records to digital format,the rate at which the government has managed to computerise and streamline the property tax collection regime in the larger cities indicates that it is only a matter of time before tier II and tier III cities also move to a more advanced tax collection regime.

According to a study by an international agency,the property tax base in developing countries such as India has been declining due to administrative and procedural inadequacies and lack of proper information regarding properties. This results in a significant number of properties not being included in the tax base. Those that are included are often inaccurately assessed. The collection mechanism also remains inefficient,especially in the smaller cities. The largest property tax revenue spinner for the government is not the residential sector,but the commercial and industrial sectors. Property tax rates in these are significantly higher than in the residential segment,and compliance is almost 100 per cent even in smaller cities. Unlike in the case of individual households,there is no sympathy factor involved in their case. In case of non-compliance,the supply of civic utilities is withdrawn, explains Mitra.

Prof Dr PSN Rao of New Delhi-based School of Planning and Architecture says,Whilst property tax is the major source of revenue for urban local bodies,on account of the recommendations of the Finance Commission,devolution of funds from national and state government revenues to local bodies has in the recent past helped the local bodies supplement property tax earnings. However,this does not purport that local bodies remain complacent; they need to look for alternatives. He recommends that firstly,they should streamline system of levy and if possible,migrate from a complex value-based system to a more simple area-based system and then,full coverage should be aimed at by including all properties on a timely basis.

HEFTY RISE SEEN

The property tax burden is likely to get heavier in Indias leading metros. MCD plans to increase the property tax rate in Delhi from the next financial year. The tax is likely to increase by as much as 24 per cent. At the time of implementation of the unit area method in 2004,it was decided that property tax rates would be revised every three years. A municipal valuation committee,to be constituted every three years,will study how much the consumer price index has gone up to suggest rise in the property tax rate accordingly. Section 116-J of the Delhi Municipal Act says if tax rates are not revised for three years after the implementation of the unit area method,they would be increased or decreased based on the change in the consumer price index. It has been five years since the unit area method was adopted.

Similarly,from April 2010,those living in Mumbai will have to pay much higher property tax. The state legislature has already amended the property tax laws. The Brihanmumbai Municipal Corporation will introduce the new tax regime from the next financial year. In the new regime commercial properties in Mumbai will have to pay thrice as much the existing tax rate.

THE WAY AHEAD

While the bigger cities have got their act together,the smaller cities have a long way to go before their tax collection system matches global standards. According to Kumar Gera,chairman of Confederation of Real Estate Developers Association of India Credai,granting industry status to the real-estate sector would expedite this process. Once the sector gets organised,the task of updating the records of new properties,which is not being done accurately in many cities at present,will become easier for the municipal authorities, he says. l

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