IPTI Xtracts
Property Tax and Assessment News From Around the World- For Information Purposes Only
INDIA
● What’s Inside – September 2015

Delhi civic body attaches accounts of property tax defaulters

End to Manual Collection of Property Tax

Property tax under judicial scanner

Hoteliers meet Sukhbir on property tax issue

Delhi’s increasing circle rates

‘Self-assessed’ property tax collection from April
DELHI CIVIC BODY ATTACHES ACCOUNTS OF PROPERTY TAX DEFAULTERS
The property tax department of South Delhi Municipal Corporation has attached the bank accounts of the Sports Authority
of India (SAI), Jamia Hamdard University, Radisson Blu hotel (Dwarka) and Acharya Narendra Dev College, among others,
for failing to clear property tax dues.
The Assessment & Collection Department of the South corporation attached the bank accounts and properties of several
defaulters over the past two weeks. Commissioner Puneet Goel said the department had given the defaulters every
opportunity available under rules to clear the dues. The bank accounts and properties were attached as a last resort, he
added.
On top of the list of defaulters is Raddison Blu Hotel in Dwarka with outstanding dues of Rs 440 crore. The department has
attached all four bank accounts of the hotel. “Since sufficient balance was not available in these accounts, the property of
the hotel has also been attached,” the commissioner said.
Officials in the Assessment & Collection Department said if the amount was not recovered soon, the process of auctioning
the hotel to recover the dues would be initiated.
The SAI owes Rs 134.47 crore, Jamia Hamdard University Rs 14.89 crore and Acharya Narendra Dev College Rs 89.46 lakh,
officials said.
“Under Section 119 of the Delhi Municipal Corporation Act, the properties of the Union, that is Central and state
government departments are exempt from paying property tax, but in view of a decision of the Supreme Court, such
properties are liable to pay service charge,” said Ram Mohan Singh, Assessor & Collector.
He said in many cases, it was seen that organisations or bodies — which were not government departments but were
associated with the government as autonomous bodies and statutory corporations, etc. — were not paying property tax.
He added that properties of such organisations which were “not purely departments under the government are liable to
pay property tax”.
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The South corporation said many such organisations were not paying property tax. “The Assessment & Collection
Department has identified them and notices are being served for filing property tax return and paying correct tax,” said
Singh.
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END TO MANUAL COLLECTION OF PROPERTY TAX
HYDERABAD: The state government has decided to dispense with manual collection of property and water taxes by
municipal bill collectors who issue hand-written receipts, and to encourage tax-payers to pay their taxes at Mee-Seva
centres or online counters at respective municipal offices.
The commissioner and director of municipal administration (CDMA) has given instructions to all urban local bodies to
discourage use of bill books and to procure hand-held Point of Sale (PoS) gadgets which can be used by bill collectors to
issue receipts. The payment thus made can be electronically recorded in the municipal office.
The department of municipal administration has taken the decision after coming to know that the tax collected by bill
collectors is not being properly accounted for and there is a mismatch between the tax collected and the money deposited
by the bill collectors in the municipal offices or bank accounts. It suspects that the collection is often misappropriated.
Urban local bodies (ULBs) are increasingly finding it difficult to track the actual money received by bill collectors and the
money deposited in the offices. It has come to their notice that bill collectors, after collecting the tax, do not immediately
deposit the money.
To put a check on such possible misappropriation, the Double Entry Accrual Based Accounting System (DEABAS) is being
followed by some civic bodies. The money received by a municipality is being reconciled the CDMA with the dates of bank
remittances and details of expenditure. It has been decided to introduce DEABAS in other ULBs too.
Municipal commissioners have been directed that the daily collection of property tax and water tax through Mee-Seva
centres and E-Suvidha have to be reconciled on a daily basis without fail. The monthly accounts are to be reconciled with
treasuries and banks without fail. The monthly receipts and expenditure should also be placed before the council for
information.
The municipal administration department has warned that that any misappropriation of municipal funds would be dealt
with seriously and disciplinary action including initiation of criminal case proceedings.
It has also warned against committing any irregularities in making offline entries of property tax collection. It was found
that some of the offline entries made by data entry operators, bill collectors and revenue inspectors in some ULBs are not
tallying with the collections made by bill collectors.
Municipal commissioners have been directed to issue instructions to the data entry operators, bill collectors and revenue
inspectors to ensure that offline entries of property tax collection on e-Suvidha should be tallied with bill collectors’ manual
collections, failing which it would be construed as misappropriation and tampering with records.
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PROPERTY TAX UNDER JUDICIAL SCANNER
The move of the Chandigarh Administration to impose property tax on residential land, buildings and flats has come under
the judicial scanner. Over a month after a notification for levying property tax was issued, the Punjab and Haryana High
Court today put the Administration on notice on a petition filed in public interest against the move.
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Taking up the matter, the Division Bench of Justice Satish Kumar Mittal and Justice Mahavir Singh Chauhan issued a notice
of motion for October 5. In his petition against the Chandigarh Administration, Adviser to the Administrator and other
respondents, Ashok Jindal through counsel Avnish Mittal contended that the impugned notification dated July 27 for
imposing property tax on residential land, buildings and flats was “ultra vires” or beyond one’s legal power or authority.
Similar notifications issued by other state governments have already been quashed by high courts by following the
principles of law laid down by the Supreme Court.
Mittal asserted that the impugned notification could not have been issued by the Adviser without first specifying/notifying
the rate of property tax on residential land and buildings and then directing the corporation to assess and impose such tax.
Therefore, the impugned notification was illegal, arbitrary and without jurisdiction.
Giving details of the procedure, Mittal said the government was required to issue necessary directions for assessing and
collecting property tax within a specified time period and the MC was bound to comply with such directions.
Upon the failure of the corporation, the government could impose property tax.
He contended that the Chandigarh Municipal Corporation was a public body, having councillors as elected representatives.
Ever since its inception, it has been working under the municipal laws, bylaws, rules and regulations framed under the
relevant Act. However, the elected body has continuously been experiencing interference from the respondent
(Administration).
He said the present case was a classical example where the Administration had arbitrarily exercised the powers under the
provisions of the Punjab Municipal Corporation “without even consulting the elected representatives, that too without
inviting objections and suggestions from any quarter whatsoever”.
Mittal said the Administration and other respondents had been fixing, raising and collecting different taxes from residents.
However, property tax was sought to be recovered by arbitrarily exercising powers for the first time in the history of
Chandigarh.
It started after a letter dated September 22, 2014, was issued by the Administration directing the corporation to
“reconsider and revise its earlier proposal for imposition of the tax on residential land and buildings ”.
The general house of the corporation could not reach a consensus. However, the Adviser issued the impugned notification.
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HOTELIERS MEET SUKHBIR ON PROPERTY TAX ISSUE
A delegation of the Punjab Hotel Industry Association met Deputy Chief Minister Sukhbir Singh Badal during his visit here
today to apprise him about their concern regarding property tax.
The delegation was led by president of the Vyapaar Mandal and director, Trade Board, Rajinder Singh Marwah, and
director, Industry Board, Raman Gupta.
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Association members stated that the Punjab government has notified property tax in the industrial category at the rate of 3
per cent per square yard and on commercial property at 5 five per cent per square yard whereas on the hotel Industry, it is
9 per cent per square feet.
The association stated that while the property tax on industry and commercial property is charged on per square yard
basis, for hotels it is charged on per square feet basis which proves disadvantageous for hoteliers. One square yard is equal
to around 9 square feet.
The delegation said in the industrial policy of 2009, the government had declared hotel business as part of industry,
therefore it should charge property tax as per rates fixed for the industrial segment. The association members stated that
with huge difference in rates for industry and hotel business, the hoteliers would suffer losses.
“The hoteliers would tend to shift their burden to the customers by increasing the prices and it would make hotels costly
for tourists. In the long run, it would be prove detrimental for tourism and the hotel industry,” said a member.
Marwah said that deputy CM has invited the hoteliers to attend a meeting at Chandigarh on September 16 to discuss the
issue.
Meanwhile a delegation of Federation of Hotels and Guest Houses Association also met the Deputy CM, demanding
regularisation of hotels and guest houses near the Golden Temple. The federation’s chairman, Harinder Singh, said Sukhbir
Badal has assured them to look into the matter.
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DELHI’S INCREASING CIRCLE RATES
The Aam Aadmi Party has been creating waves for all the wrong reasons, recently they have been proposing an increase in
circle rates for flats of group housing societies and DDA by around 100 per cent. The revenue department of the Delhi’s
government has prepared a proposal which also favors to increase circle rate on agriculture land and farmhouses by up to
100 per cent and 150 per cent respectively.
What is a circle rate?
It is the minimum price at which a property has to be registered in case of its transfer. The rates are determined by state
governments and are revised from time to time according to market dynamics. In fact, circle rates differ within cities in the
same state, and among various localities of a city.
These rates are an indicator of likely prices of properties in various areas. The state governments collects stamp duty and
registration charges on the declared value or the circle rate, whichever is higher, on the property being sold or bought.
If you raise the circle rate then it leads to a rise in revision on property valuations and buyers will have to shell out more.
With sluggish property markets and already a really high property rates, increasing circle rates right now maybe a bad move
for Delhi’s economy.
Delhi
Currently in Delhi, the AAP government is proposing an increase in circle rates, there are eight categories, A to H, based on
the price per sq. metre, with A being the most expensive category. Until now flats or apartments do not come under
categorization prescribed by municipal corporations for tax collection due to which they have a uniform circle rate of Rs
58,000 per square meter, according to officials.
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Now if this proposal goes through then the owner of the flat will have to pay stamp duty according to their area. For
example a person wanting to buy a flat in the posh South Delhi will have to pay more stamp duty in comparison to a person
buying a flat in north-west Delhi.
As per existing rule, circle rate on agriculture land is charged on uniform basis which is Rs 53 lakh per acre, but
department’s proposal favours to increase it by 100 per cent.
Apart from agriculture land, the department also proposes to increase circle rate on farmhouses by up to 150 per cent.
Black money
CM Arvind Kejriwal says that the main reason for this happening is the practice of using black money for purchasing
property. A hike in circle rates thwarts the use of black money to purchase property as it reduces the scope to use illegal
funds.
Also, those who plan to save on stamp duty will have to pay up higher amounts. Kejriwal said “Due to government’s
notification, people, who were involved in agriculture land fraud and buying the land through black money, are now losing
in their business,”.
Property rates
The property rates in Delhi have fallen 30 percent, houses that were going for 2.4 crores now are going for 1.8 crores. Delhi
much like the rest of the country is witnessing slow growth, people are now not considering property as a good
investment. Now almost every builder has unsold inventory in Delhi, there are vacant apartments lying in almost every part
of Delhi. Despite Lt Governer Najeeb Jung staying AAP government’s notification on revised circle rates, the Delhi
government went ahead and issued revised rates for agricultural land without seeking the nod of the Lt. Governor even
though land comes directly under the control of the L-G.
The Governor’s office sent back a communication saying that the matter was under active scrutiny and to avoid legal
complications, the implementation of the notification should be stayed immediately.
Circle rates which were introduced in 2007, are revised periodically. In Delhi, these rates were revised in November 2012,
when the rates were hiked by 200 per cent depending on the area and then again in 2014 when the circle rates were
increased by 20 percent. This move will definitely increase the revenue for the government but it won’t help the general
public who are looking to invest.
This economy should encourage growth but a move like this will only set the public back.
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‘SELF-ASSESSED’ PROPERTY TAX COLLECTION FROM APRIL
A property owner in the city will get the option of adopting the Unit Area Assessment (UAA) method of valuation from
next April along with the existing method of determining property tax.
Kolkata Municipal Corporation officials believe the UAA system will do away with inspector raj, make tax collection
transparent, tax-paying easier and generate more revenue.
After the new method is introduced, corporation inspectors will not visit the taxpayers' properties as they do now.
Instead, taxpayers will make a self-assessment of their properties and fill in a self-declaration form sent by KMC.
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The corporation will only charge 10% of the annual valuation of the property, which will be revised every six years, as
property tax. This is applicable only if there are no additions or alterations of the property between two assessment years.
If owners make alterations to the property, they have to mention it in the form. If someone tries to hide it, there will be a
high penalty, sources said. KMC will also send an objection form where a taxpayer can argue against the existing tax rate.
Those who accept a flat 10% hike on annual valuation will be sent a revised tax bill. Assessees who have made changes to
their premises will be sent a fresh tax bill based on their declarations. And those who disagree will have to submit the
objection form that will then go to KMC assessment department for special hearing.
MMiC-revenue Debabrata Majumder said, "We want taxpayers to come forward and clear dues. To encourage them to pay
on time, we should not make unjustified hikes in property taxes," he added.
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International Property Tax Institute
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*The items included in IPTI Xtracts have been extracted from published information; IPTI accepts no responsibility for the accuracy of the
information or any opinions expressed in the articles