BMC proposes 14 per cent property tax hike
Mumbaikars should prepare themselves to pay higher property tax bills from April 1, 2015. The Brihanmumbai Municipal Corporation (BMC) has proposed to increase the property tax by up to around 14 per cent and this hike has been planned in the revised property tax rules that will be adopted by the BMC till 2019. The only silver lining for citizens is that the hike would have been a lot more of up to 27 per cent had the existing property tax rules been retained.
Rules revised to calculate property tax
According to the revised rules, the formula to calculate the capital value of a property, which determines the property tax, has been revised by changing some major factors. One of the changes will be that the capital value of the property will now be determined by taking into account the carpet area of your flat, instead of the built-up area.
This has been introduced after the BMC was reprimanded by the Bombay High Court over 17 ongoing petitions, which challenge the civic body’s capital value-based property tax system.
Stating that it wanted to curb revenue losses, the civic body had proposed a new formula for calculating tax, “carpet area × Ready Reckoner Rate × 1.2%” in July 2014. The proposal was, however, rejected by the standing committee members, who criticised the civic body for failing to relieve the burden on property owners. The revised set of rules has proposed the formula as “carpet area × RRR”. The earlier rules had classified properties in 21 different categories, which made assessment very difficult. In the new set of rules, the number has been brought down to six categories to make the process of levying tax simpler.
Another change in the rules is that the BMC has reduced the weightage accorded to the different types of constructions – Reinforced Cement Concrete (RCC) buildings, luxurious RCC buildings and chawls. Concessions have also been proposed in the weightage given to the way in which the properties are used — residential, commercial and industrial, among others.
Relief for property owners
According to civic officials, these reductions have been planned taking into account the steep hike in ready reckoner rates. The effect of this hike has been reduced by bringing down the weightage given to other factors used to calculate the capital value of properties. The hike would have been a very high 27 per cent had the existing property tax rules been retained and the reduction in the weightage of the factors mentioned above has ensured the hike is not as severe as it could have been.
On the other hand, the weightage on hotels has increased, according to their grading. Schools, too, will be taxed according to residential rates and not commercial rates.
Once approved by the party group leaders in the BMC, the proposal will be put forth before the civic standing committee. Experts believe that the move of reducing the hike from 27 to 14 per cent comes with an eye on 2017 civic elections. The BMC will have to pay back the additional amount charged to citizens, who paid taxes between March 2010 and 2015, as per the built-up area. The administration, however, clarified the proposal will be in effect only from April 2015 and not since 2010.
BMC expects 15 per cent gain in tax collection
The BMC is expecting a 15 per cent gain in property tax collection across the city, with its revised set of rules for property tax collection for 2015-2020.The cash-rich BMC’s current estimates for property tax are Rs 4,400 crore approximately.
In September 2014, with an increasing number of petitions filed in the Bombay High Court, which said that BMC was wrongly calculating property tax on the built-up area, the civic body had formed a committee to review the existing set of rules. The new set of rules is expected to come into effect from April 2015.
