Residents of Mumbai have been taken in by surprise in the last one month as housing societies have received hefty bills on account of property tax dues, which the city’s civic body, Brihanmumbai Municipal Corporation (BMC) is charging with restrospective effect from 2010.
The bills, which have reached even a whopping R1 crore in case of some South Mumbai properties, have Mumbaikars in protest, calling it ‘unjust and unfair’. According to legal experts, the tax has been doubled for residential properties and almost tripled for the majority of commercial buildings in the city.
The new tax system, which affects about 15 lakh families in the entire western and eastern suburban areas and the island city, came into effect from April 1, 2010, after which BMC issued only provisional bills, and had said citizens will be charged retrospectively once the new system is cleared by the statutory standing committee of the BMC. The committee cleared the proposal in June 2012.
The new capital-value system bases taxes for all buildings (old and new) according to the Ready Reckoner (RR) rate, against the older rateable value system which was based on the rent of the property. The change means that now the tax is being calculated on the market price of the property.
However, city lawyers say that the basis of this new calculation is faulty because RR rates are used to calculate the minimum registration and stamp duty charges paid at the time of registering property, while there are various other factors that govern the market value of a property, which the new system overlooks. RR rates are rates fixed by the government, below which sales of property cannot happen in the given area. From January 1, 2013 these rates have touched a maximum of 30% in the city, which has already burnt pockets of homebuyers with higher stamp duty outgo.
"RR rates cannot be the basis for property valuation. For example, on the same floor an apartment with a garden view will command a different value from the other facing say a slum. Also, proximity to public transport, quality and materials used in construction and several other criterion dominate the value of a property," says Godfrey Pimenta, a practising lawyer in Mumbai.
He adds that there are other faults in the calculation system as the BMC has clubbed 400-500 plots together to arrive at the base value, which includes luxury