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
2
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.
4
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 taxes)
Rules, 1990.
4. Hyderabad
Municipal
Corporations
(Assessment of property taxes) Rules,
1990.
7
Property Tax - Components
1.
2.
3.
4.
5.
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.
9
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
the method of assessment of
Property Tax.
12
Allowances for Repairs
Age of the building
25 years and below
Deduction allowed
from ARV attributable
to the building
10% of ARV
Above 25 years and upto 40 20% of ARV
years
Above 40 years
30% of ARV
13
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
and
2. Marble flooring.
3. Superior sanitary and electrical fittings
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
MRV per sq.mt of plinth area to be
fixed separately for the following
categories.
1.Cellar
2.Ground and First Floor
3.Second and Third Floor
16
Multistoried Buildings
i. 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.
18
Contd..
7. Publication
Form – A
of
the
draft
notification
in
8. Consultation with elected representatives
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’.
19
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.
20
Division of
Municipality into Zones
First Step:
1. Teams to be constituted for division of
Municipalities into zones with the 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.
22
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.
v.
Sub-categorization of zones and fixation of separate rents
has to be provided for the following categories :
a)
Buildings abutting main roads.
b)
Buildings abutting internal roads.
c)
Buildings abutting lanes and by-lanes.
23
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.
4.
Mangalore tiled / Asbestos / GI roofed buildings.
5.
Country tiled buildings.
6.
Thatched roof / Huts.
7.
Any other building not covered above
24
Classification of buildings based on
nature of usage
Third step:
After classification of buildings based on their type of
construction, they shall be further classified based on
nature of usage
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.
6) Cinema Theatres
entertainment
or
places
of
mills,
public
7) Any other usage not covered above
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)
A.C. Marriage Halls / Function Halls
7)
Non-A.C Marriage Halls
8)
Petrol Bunks
9)
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.
29
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.
31
Method of Filling up Survey Format
Col.
No
Item
Zone No:
Method of filling up the column
As per draft notification in Form –’A’
Sub-Zone No:
Nature of construction
As per situation in the field
Type of usage
1.
Sl.No
2.
Door No
This column will be filled up as per
Municipal Records
3.
Existing Property Tax per
annum
This column will be filled up as per
Municipal Records
4.
Existing Gross MRV
This column will be filled up as per
Municipal Records
32
Contd..
5.
Name of the Tenant
This column has to be filled up after
conducting proper enquiry
6.
Cellar/ Ground Floor/ First
Floor / Other Floors
After inspection of the building, this
column has to be filled up
7.
Plinth Area
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.
33
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
8.
Prevailing MRV
After inspection of the building, the
column has to be filled up after
enquiring from the tenant.
9.
Remarks
Any other relevant information may
be noted here.
34
Survey of Data relating to prevailing rental
values of 20% of rented buildings
Fixation of average
: Based
on
information
monthly rental value per
gathered in survey
Sq. m. of plinth area
i. Total up the plinth area
ii. 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.
35
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.
From
To
5) Monthly Rental Value proposed based on
construction-wise, usage –wise.
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.
37
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.
39
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.
40
Publication of Final Notification
in Form - ‘A’
Tenth step:
1.
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
b)Monthly rent fixed for each category of the building
based on construction and usage
3.
Publication of the notification in District Gazette and
local news paper.
41
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
Rs. 8-00
Rs 18-00
Shops
Rs. 30-00
Rs 50-00
Rs. 18-00
Rs. 55-00
ii. Hospitals & Nursing Homes
Rs. 18-00
Rs. 26-00
iii. Educational Institutions
Rs. 12-00
Rs. 24-00
i. Hotels, Lodges
Rs. 14-00
Rs. 38-00
ii. Godowns
Rs. 9-80
Rs. 38-00
Industrial Usage
Rs. 8-00
Rs. 24-00
Cinema Theatres
Rs. 7-50
Rs. 30-00
Other Usage
Rs. 4-50
Rs. 20-00
Public Usage
i.
Offices & Banks
Commercial Usages
42
Comparative statement showing MRV fixed per sq.mt of
plinth area from 01.04.2002
Sl.
No.
Nature of Usage
1
2
Maximum MRV fixed per sq.m. of
plinth area
Municipalities
Corporations
3
4
Rs.
Rs.
1
Residential
18.00
16.20
2
Shops
50.00
45.00
3
Offices and Banks
55.00
40.00
4
Hospitals
26.00
22.00
5
Educational Institutions
24.00
12.00
6
Hotels and Lodges
38.00
30.00
7
Godowns
38.00
30.00
8
Industries
24.00
20.00
9
Cinema Theaters
30.00
25.00
10
Other uses
20.00
19.00
43
Property Tax Assessment List of
Buildings in Form – ‘B’
Eleventh step:
i.
Teams to be constituted for preparation of Property Tax
Assessment List of Buildings in Form – ‘B’ with the
following officers
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.
45
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 selfcontained reasons.
As soon as one assessment book is
completed, assistants in revenue section shall
take up calculation of property tax.
47
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.
48
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
-
Plinth area -
Construction
(1)
Nature of
Usage
-
(2)
-
(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) To serve on the adult member of the family.
3) 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.
51
Receipt of Revision Petitions
Fifteenth step:
1. 30 days time from date of service of special
notice is allowed for filing of revision
petitions
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.
52
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 AnnexureIII of the Circular.
53
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.
57
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.
58
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.
59
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 of
Commissioner.
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.
62
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.
63
Important Observations of the
Supreme Court
1.
The Act and Rules provide a complete code for
assessment of the Property Tax to be levied for the
buildings and lands.
2.
The fair rent determined under the Rent Control Act in
respect of a Property is not binding on the
Commissioner.
3.
The committee set up by the State Government has no
statutory existence.
4.
Its recommendations are advisory and are not binding
on the Commissioner.
5.
The provisions of Rent Control Act will not apply for
fixation of annual rental value for levy of Property Tax.
64
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. Simplicity in the entire system.
66
THANK YOU
PPT on new system of property tax in Telangana Dt. 18-10-2014