New System of Property Tax in Municipalities

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Transcript New System of Property Tax in Municipalities

WELCOME

18-10-2014

New System of Property Tax in Municipalities in Telangana State

Presentation by : M. Prasada Rao, IAS (Retd.) Former Commissioner & Director of Municipal Administration

Main sources of income to ULBs

1. Taxes 2. Non-taxes 3. Assigned revenues i.

Entertainment tax ii.

Surcharge on stamp duty iii. Profession tax 4. Non-plan grants 5. Plan grants (16 items) 3

Property Tax

1. Single largest source of revenue to the ULBs.

2. Constitutes about 20% of total municipal revenues of ULBs during 2013-14 3. Constitutes about 43% of internal revenues of ULBs during 2013-14.

System of Assessment Prior to 1989

Basis for fixation of Annual Rental Value 1. Fair Rent fixed or fixable in respect of buildings covered by Rent Control Legislation 2. Rent received for the building 3. Rent fixed on hypothetical basis in respect of buildings where Rent is not fixed.

4. Rent fixed on hypothetical basis in respect of owner occupied buildings 5

Problems faced in fixation of Annual Rental Value

1. Considerable discretion to the assisting authorities.

2. Large disparities in the amount of tax for similar buildings used for similar purpose.

3. Determination of Annual Rental Value varies with Assessing authorities.

4. Complaints of Arbitrariness Assessment of Property tax.

in the 6

Amendments to Municipal Laws in 1989

1. Amendment to AP Municipalities Act, 1965 2. Amendment to Hyderabad Corporations Act, 1955 Municipal 3. AP Municipalities (Assessment of Rules, 1990.

taxes) 4. Hyderabad (Assessment of 1990.

Municipal Corporations property taxes) Rules, 7

Property Tax - Components

a tax for general purpose; a water tax; a drainage tax; a lighting tax; and a scavenging tax 8

Rates of Property Tax

Property tax and library cess shall not exceed

Category Not to exceed

(a) Residential buildings : 25 percentum of ARV (b) Non-Residential Buildings : 33 percentum of ARV Library cess shall be collected at the rate of 8 paise for every rupee in the property tax levied.

New Property Tax System

Basis For Levy of Property Tax : Annual Rental Value Factors for fixation of Annual Rental Value

1. Location of the building 2. Type of construction 3. Plinth area 4. Nature of use 5. Age of the Building 10

Objectives of New System of Property Tax

1. To evolve a scientific method in the levy of Property Tax in the Municipalities.

2. To fix the Assessments in a uniform manner in respect of similar Buildings situated in one locality and used for similar purpose.

3. To reduce the discretion and to avoid arbitrariness in the Assessment of Property Tax.

4. To simplify the Procedure of assessment 11

Contd..

5. To make tax administration to be of more efficient and effective in the levy of property tax.

6. To de-Link the provisions of Rent control Act from the method of assessment of Property Tax.

7. To provide relief to the buildings constructed under weaker section Housing Scheme and to owner occupied residential buildings.

8. To improve the resources of the Municipalities by Restructuring Property Tax.

the method of assessment of 12

Allowances for Repairs

Age of the building Deduction allowed from ARV attributable to the building 25 years and below 10% of ARV Above 25 years and upto 40 years 20% of ARV Above 40 years 30% of ARV

Rebate to owner occupied residential buildings

40% of ARV attributable to the building inclusive of deduction permissible for age of the building 14

RCC Posh Buildings

1. Teak wood cupboards.

for doors, windows 2. Marble flooring.

3. Superior sanitary and electrical fittings and 4. Attached bathrooms 5. Difference in MRV per sq.mt of plinth area between RCC Posh building and RCC ordinary building shall be limited to 20% of MRV per sq.mt of plinth area 15

Non-Multistoried Buildings without lift facility

fixed MRV per sq.mt of plinth area to be separately for the following categories.

1.Cellar

2.Ground and First Floor 3.Second and Third Floor 16

Multistoried Buildings

Building with more than ground and three floors.

ii. Rent to be fixed separately for the following categories.

a) Cellar b) Ground and First Floor c) Other Floors 17

Plan of Action for Levy of Property Tax

1. Division of Municipality into zones.

2. Classification of buildings based on type of construction.

3. Further classification of buildings based on nature of usage.

4. Survey of prevailing rental values of 20% of rented buildings.

5. Preparation of draft notification in Form – A 6. Consultation with State Property Tax Board.

Contd..

Publication Form – A of the draft notification Consultation with elected representatives in 9.

Consideration of the objections suggestions received from the public and 10. Publication of the final notification in Form ’A’.

11. Preparation of property tax assessment list of buildings in Form ’B’.

Contd..

12. Preparation of special notices 13. Issuance of public notice regarding levy of property tax for the first time.

14. Service of special notices.

15. Receipt of Revision Petitions.

16. Disposal of Revision Petitions.

17. Disposal of appeals.

Division of Municipality into Zones

First Step:

1. Teams to Municipalities be into constituted zones for with division the of following officers: a)Revenue Officer / UD Revenue Inspector b)Town Planning Officer c) Municipal Engineer 21

Contd..

ii.

Factors for division of municipality into zones 1. Provision of civic amenities 2. Proximity to markets and shopping centers.

3. Proximity to educational Institutions and medical institutions.

4. Proximity to banks, postal services and public offices.

5. Proximity to factories and industries.

Contd..

iii.

As far as possible, the number of zones should be kept at the minimum.

iv.

Rents fetched on main road varies from rents fetched on internal roads and lanes and by-lanes in a zone.

Sub-categorization of zones and fixation of separate rents has to be provided for the following categories : a) b) Buildings abutting main roads.

Buildings abutting internal roads.

c) Buildings abutting lanes and by-lanes.

Classification of the buildings based on Type of Construction

Second Step:

Classification of buildings based on Type of constriction 1.

RCC Posh buildings 2.

RCC Ordinary buildings 3.

Madras Terraced / Jack Arch / stone slabs / slate roofed buildings.

Mangalore tiled / Asbestos / GI roofed buildings.

Country tiled buildings.

Thatched roof / Huts.

Any other building not covered above 24

Classification of buildings based on nature of usage

Third step:

After classification of buildings based on their construction, they shall be further classified based on nature of usage type of 1) Residential 2) Shops, Shopping complexes 3) Public use i. Office complexes, public and private offices and banks ii. Hospitals and Nursing Homes iii. Educational Institutions 25

Contd..

4) Commercial purposes i. Hotels, lodges, restaurants ii. Godowns and other business establishments 5) Industrial purposes i.e., factories, workshops and other industries.

mills, 6) Cinema Theatres entertainment or places 7) Any other usage not covered above of public 26

Contd..

Nature of Usage:

Following additional usages may be provided depending on local circumstances wherever necessary

Few Examples:

1) ATMs 2) Corporate Hospitals and Nursing Homes 3) Clinics, Dispensaries and Diagnostic centres 4) Star Hotels 5) Other Hotels 27

Contd..

6) 7) 8) 9) A.C. Marriage Halls / Function Halls Non-A.C Marriage Halls Petrol Bunks Cellular towers 10) Hostels 11) Any other usage 28

Survey of Data relating to prevailing rental values of 20% of rented buildings Fourth Step

• Classification of buildings • Further classification of buildings • Maximum categories of buildings available in a zone : 6 categories based on construction : 10 categories or more based on nature of usage : 60 or more • Information to be gathered for 20% of all categories of rented buildings in a zone / sub-zone to the extent of their availability or situation.

Contd..

Method of conducting survey

Bill Collectors and Revenue Inspectors to be entrusted with survey work 1) Introduce themselves to the Tenants of Buildings.

2) Explain the purpose of visit.

3) Leaf let has to be handed over to the Tenant of the Building.

4) Gathering of information relating to plinth area and prevailing Rental values of 20% of rented buildings as per nature of construction and usage 30

Contd..

• Information relating to 20% of rented Buildings to their extent of their availability in a zone or sub-zone • Type of Construction-wise.

• Nature of Usage-Wise.

• All Zones and Sub-zones.

Method of Filling up Survey Format

Col.

No Item

Zone No: Sub-Zone No: Nature of construction Type of usage Sl.No

Door No 3.

Existing Property Tax per annum Existing Gross MRV

Method of filling up the column

As per draft notification in Form –’A’ As per situation in the field This column will be filled up as per Municipal Records This column will be filled up as per Municipal Records This column will be filled up as per Municipal Records 32

Name of the Tenant

Contd..

Cellar/ Ground Floor/ First Floor / Other Floors Plinth Area This column has to be filled up after conducting proper enquiry After inspection of the building, this column has to be filled up Area arrived at by multiplying the length of the building with breadth as measured outside the basement level.

Plinth area of a building includes plinth area of cellars, ground floor and all other floors above the ground floor of the building. Open balconies, open staircase, open portico without support are not to be included in plinth area .

Prevailing MRV 9.

Remarks

Contd..

Plinth area has to be taken separately in the following cases: 1. if the construction is more than one category.

2. if the building is put to different uses.

3. in respect of multistoried buildings plinth area has to be taken up floor-wise After inspection of the building, the column has to be filled up after enquiring from the tenant.

Any other relevant information may be noted here.

Survey of Data relating to prevailing rental values of 20% of rented buildings

Fixation of average monthly rental value per Sq. m. of plinth area : Based on gathered in survey i.

ii.

information Total up the plinth area Total up prevailing MRV iii. Arrive at average MRV per sq.mt of plinth area by dividing total monthly rent with total plinth area

Test Checking:

Revenue officers, Commissioners to conduct test check of 10% of the buildings surveyed.

Preparation of Draft Notification in Form ‘A’

Fifth step:

Information to be contained in the draft notification 1) Zone No.

2) Sub-Zone No.

3) Localities / Areas included in the zone 4) Name of the locality Door Nos.

5) Monthly Rental Value From proposed construction-wise, usage –wise.

To based on 36

Consultation with State Property Tax Board

Sixth Step:

1. Commissioner to consult State Property Tax Board about monthly rent proposed per Sq. mt. of plinth area for levy of property tax.

2. Board to study the draft notification 3. Make a comparative study of the monthly rental values proposed by other Municipalities in the district.

4. Offer its views in the matter.

Publication of Draft Notification in Form - A

Seventh Step:

1. Due consideration to be given to the views of the Board 2. Finalize the draft notification in Form – A 3. Draft notification to contain: a) Division of Municipality into Zones b) Monthly rent proposed per Sq. mt. of plinth area for various categories of buildings c) Calling for objections or suggestions from the public within 15 days 4. Draft notification to be published in the District Gazette and local news paper 38

Consultation with Elected Representatives

Eighth Step:

1. Commissioner to tabulate the objections/ suggestions received from public on the draft notification.

2. To hold informal meeting with Chairperson and Members including Ex-officio, Co-option Members of the Council for suggestions on the draft notification.

Consideration of the objections and suggestions Ninth Step:

1. Commissioner to consider the objections and suggestions from the public 2. Commissioner to consider the suggestions received in the informal meeting with Elected Representatives 3. Due consideration shall be given to the views of the Board.

4. Commissioner to record decision on the suggestions / objections on the tabulated statement 5. Commissioner may revise the zones and monthly rent provisionally fixed for various categories wherever necessary.

Publication of Final Notification in Form ‘A’

Tenth step:

Commissioner shall prepare a final notification showing monthly rent fixed per Sq. Mt. of plinth area in Form – A 2.

Final notification to contain a)Division of Municipality into zones and sub-zones with localities and door nos. included 3.

b)Monthly rent fixed for each category of the building based on construction and usage Publication of the notification in District Gazette and local news paper.

Statement showing the maximum monthly rental value fixed per square meter of plinth area in Municipalities in the year 1992-93 and 2002-03: Residential Purpose Shops Public Usage i.

Offices & Banks ii. Hospitals & Nursing Homes iii. Educational Institutions Commercial Usages i. Hotels, Lodges ii. Godowns Industrial Usage Cinema Theatres Other Usage Rs. 8-00 Rs. 30-00 Rs. 18-00 Rs. 18-00 Rs. 12-00 Rs. 14-00 Rs. 9-80 Rs. 8-00 Rs. 7-50 Rs. 4-50 Rs 18-00 Rs 50-00 Rs. 55-00 Rs. 26-00 Rs. 24-00 Rs. 38-00 Rs. 38-00 Rs. 24-00 Rs. 30-00 Rs. 20-00

Comparative statement showing MRV fixed per sq.mt of plinth area from 01.04.2002

Sl.

No.

1 2 3 4 5 6 7 8 9 10 1 Nature of Usage 2 Residential Shops Offices and Banks Hospitals Educational Institutions Hotels and Lodges Godowns Industries Cinema Theaters Other uses Maximum MRV fixed per sq.m. of plinth area Municipalities 3 Rs.

Corporations 4 Rs.

18.00

50.00

55.00

26.00

24.00

16.20

45.00

40.00

22.00

12.00

38.00

24.00

30.00

20.00

30.00

20.00

25.00

19.00

Property Tax Assessment List of Buildings in Form – ‘B’

Eleventh step:

Teams to be constituted for preparation of Property Tax Assessment List of Buildings in Form following officers – ‘B’ with the 1) Revenue Inspectors 2) Assistant Engineers 3) Town Planning Supervisors 4) Town Planning Building Overseas 5) Senior Assistants 6) Any other suitable staff 44

Contd..

ii. Basis for Assessment of Property tax on buildings.

iii. Proper filling up of various columns is very important.

iv. Preparation of Form ’B’ may be started as soon as division of Municipality into zones is completed.

v. Teams to inspect the buildings and fill up columns from 1 to 26.

vi. Columns 27 & 28 to be filled up by the Commissioner.

Property Tax Assessment List of Buildings

Following officers to test check 10% of the assessments.

1) Commissioner 2) Revenue officer 3) Town Planning officer 4) Municipal Engineer 46

Fixation of Assessment Calculation of Property Tax

1. Column 27 2. Column 28 : : Fixation of MRV Reasons for increase To be filled up by Commissioner with self contained reasons.

As soon as one assessment book is completed, assistants in revenue section shall take up calculation of property tax.

Approved Assessment List

1. Commissioner to sign the assessment list for each ward as soon as it is completed.

2. Certify the correctness of the total amount of the property tax.

Preparation of Special Notices

Twelfth step:

1. Special Notices are to be prepared as soon as one assessment book is completed in all respects.

2. Special notice to contain the following reasons for levy of property tax: a) Zone No. : b) Nature of Construction (1) Plinth area (2) Nature of Usage (3) c) Monthly rental value fixed : 49

Public Notice

Thirteenth Step:

After completion of levy of property tax public notice under Rule 10 (1) of Schedule - II to be issued.

Notice to be affixed at :

1. Notice board of Municipal Office 2. Notice boards of important public offices 3. Publication by beat of drum 50

Service of Special Notices

Fourteenth step:

All special notices to be served before the stipulated date i.e. 31-3-2015

Method of service:

1) By giving to the owner of the building by obtaining acknowledgement and date on office copy of special notice.

2) 3) To serve on the adult member of the family.

To send by RPAD if the owner is a absentee landlord.

4) By fixing the same to the door of the building if the above methods are not possible.

Receipt of Revision Petitions

Fifteenth step:

1. 30 days time from date of service of special notice is allowed petitions for filing of revision 2. Revision petitions shall be entered in the register of Revision Petitions 3. Docket sheet shall be prepared for every revision petition with eighteen items.

Disposal of Revision Petitions

Sixteenth step:

1. Hearing of the revisions petition 2. Commissioner to record the statement of the petitioner 3. Speaking order to be passed by the Commissioner 4. Model speaking order is given in Annexure III of the Circular.

Disposal of Appeals

Seventeenth step:

1. Appeal lies to RDMA on the orders passed by the Commissioner 2. Appeal to be heard a) if it reaches within 15 days from the date of receipt of orders from the Commissioner b) Tax to be deposited within 15 days 54

Contd..

3. Appeal to be entered in the register of appeals 4. Docket sheet to be prepared 5. Hearing of the appeal 6. Consultation with Municipal Chairperson 55

Contd..

7. RDMA to record the statement of the Appellant 8. Speaking order to be passed by the Commissioner 9. Model speaking order is given in Annexure-III of the Circular 56

Levy of property tax on lands

1. Property tax shall be levied on lands a) Not used for agricultural purposes b) Not occupied adjacent to the building 2. Area not exceeding three times of plinth area of the building including its site or vacant land to the extent of 1000 Sq. Mts.

whichever is less shall be deemed to be adjacent premises of the building.

Contd..

3. Capital value of lands fixed by Registration Department to be the basis for levy of tax.

4. Property tax shall be levied at 0.20% of capital of the land 5. Assessment list of lands shall be prepared in Form – C 6. Procedure prescribed for assessment of buildings shall be followed for levy of property tax on lands.

Exemptions from payment of Property Tax in Municipalities

a) Places set apart for public worship.

b) Choutries c) Recognized educational institutions including hostels used for Charitable purposes.

d) Ancient monuments not used as residential quarters or as public offices.

e) Charitable hospitals and dispensaries.

f) Burial and burning grounds.

g) Irrigation works vested with the Government.

Exemption of owner occupied Residential Buildings

Municipal Corporations Selection and Special grade Municipalities Other municipalities ARV upto Rs.900/ Rs.450/ Rs.300/ 60

Houses constructed for Urban Poor

In respect of houses constructed for urban poor, property tax shall be collected at one rupee per half-year 61

Judgment dt: 29.12.94 of High Court of A.P.

1. Determination Commissioner.

of Property Tax belongs to 2. Advisory Committee has no role to play.

3. ARV fixed by the Commissioner shall be limited to the fair rent determined or determinable under Rent Control Act.

4. Commissioner may fix a lesser rental value subject to the maximum as above.

5. Commissioner to dispose of the objections notwithstanding Form ‘A’ notification.

Judgment of Supreme Court

Hon’ble Supreme Court in Civil Appeal No. 4052 of 1996 in its judgment dated 2.5.2001 ordered that the findings / decision of the High Court in Point Nos. 3 and 5 as stated in the judgment under challenge are set aside.

Important Observations of the Supreme Court

The Act and Rules provide a complete code for assessment of the Property Tax to be levied for the buildings and lands.

The fair rent determined under the Rent Control Act in respect of a Property is not binding on the Commissioner.

The committee set up by the State Government has no statutory existence.

Its recommendations are advisory and are not binding on the Commissioner.

The provisions of Rent Control Act will not apply for fixation of annual rental value for levy of Property Tax.

Impact of New System of Property Tax

1. Tax payers Acceptability 2. Transparency 3. Simplicity in assessment of property tax 4. Buoyancy in revenue 5. Reduction in corruption 65

Reasons for success of New system of Property Tax

1. Designed by few Municipal Commissioners in 1988 – 89.

2. Peoples participation in fixation of monthly rental value.

3. Extensive consultations with stakeholders at local, regional and State level for a period of two years.

4. Training to all Municipal Commissioners and Staff.

5. Absence of discretion to assessing authorities 6. Simp licity in the entire system.

THANK YOU

PPT on new system of property tax in Telangana Dt. 18-10-2014