Property Tax revised and approved
Property Tax revised and approved
Property Tax revisions may have short term gains but will burn in the long run
By Ubaid Parkar
The Legislative Assembly recently approved Bill No. LXXII (72) based on the report of the Joint Committee on revisions of Property Tax in Mumbai. The bill had proposed a standard taxation structure on the basis of capital value of a property rather than the rateable value. The Committee was chaired by Mr. Rajesh Tope, Minister of State for Urban Development.
The Mumbai Municipal Corporation Act will now be amended accordingly with other recommendations in the Bill as well. The bill implicates that the tax structure will ensure that property taxes in South Mumbai, who have been enjoying major benefits, will face an increase by 100 per cent as per reports and the suburbs will see a decline of up to 25 per cent.
Revisions are imperative but so are their impacts. Rents on Capital Values are in the scaffolding of 0.1 per cent to 2 per cent. Raj Purohit, MLA and a part of the committee was one of two dissenters from the 15 member composition suggested the imposition of the percentage of not more than 0.5 per cent. This was attributed to the fact that the future revisions of the capital value will ensure that the value goes one way, up.
Valuation is a very touchy subject laden with subjectivity. Capital valuation may associate itself with development for instance. Land alone can be evaluated through numerous avenues including developmental rights. If the dichotomy of Market Value and Cost Value are dealt with, the balance required in improvements and its depreciation thereby will further create bipartisan or even tripartite views, if not more.
Assuming adequate developments take place of say a particular ward, locality or even the building per say, the value of the same will perceptibly rise, whichever valuation boulevards are chosen. This means development of the city, which is one of the principle working guideline of the Municipal Corporations and any political aficionado, will now come at an unjustified cost. Even development of a particular sector of a ward may raise the capital value of the entire ward, which means we may pay a higher property tax, of course not exceeding twice the value of the previous year which is a kind of an anti-climax, without any added benefits at all.
To expect development now, which is to be perpetrated through the taxations which already existed before the bill, will mean even more tax burdens and a recurring one at that too.
The time span is of question too. The basis of five years can have varied allusions, five years in a boom is different from five years in a slowdown, economic and political scenes may create uncertainties, and worse still, reservations about these scenarios may complicate the time when valuations are to be held.
It looks dark with no bright sides. A dim light illuminates stating that capital values taxes can decline by up to 40 per cent from the preceding year. If this happens, might I suggest you move out, as capital depreciation can only mean dilapidated, delaminated, decaying, dodgy buildings which are doomed to be condemned and require evacuation at the earliest. Because that is the only reason capital values may dip.
Furthermore, commercial taxation, which is capped at not more than thrice the amount of the preceding year (the preceding year is the end of the aforementioned five year period) may have a severe impact on residential segments. Mumbai will be unbearably expensive, say by 2020, dryly projecting a poor vision for the middle class masses.
