Property Tax

The state list in the VII schedule of the Indian Constitution provides for the levy of property tax. The tax is designated as “Taxes on lands and buildings”. In the Government of India Act of 1935 the parallel entry was “Taxes on lands, buildings, berths and windows”.  Property tax is by far the main stay of Municipal finance in the State. This tax possesses the essential characteristics of a good tax.

LEVY OF TAX :

            In any system  of taxation three stages are attendant  on the imposition of any tax.  They are

1.       Levy or declaration of liability

2.       Assessment

3.       Collection

First is a legislative function, the second is quasi-judicial and the last an executive function.

            Wide publicity has to be given tot he intention to impose the tax.  The views of the persons to be taxed require to be ascertained.  There views are to be considered by the authority imposing the tax.  These processes must come to a imposed. This is the common procedure for imposition of taxes.

             When a local authority resolves to levy Property tax, the council or the authority has to pass a resolution to levy, the council or the authority has to pass a resolution determining to levy the tax and the resolution should also specify the rate at which and the date from which the tax shall be levied.  But before passing a resolution imposing a tax for the first time or increasing the rate of an existing tax, the council shall publish a notice declaring its intention.

            The property tax my comprise

i)                     a water and drainage tax

ii)                   a lighting tax

iii)                  a scavenging tax

Properties liable to Tax :

All buildings and lands unless exempted under the statutes are liable to property tax.  In deciding liability building will have the meaning given in the definition of Building in the Act.

Calculation of Property Tax :

1.       Reasonable letting basis :

GUIDELINES FOR DETERMINATION OF THE ANNUAL VALUE

1.       Basis value  :

Basis value has been fixed in all the Municipalities and Town-ship Committees for different zones for purpose of Taxation of Annual Rental value of buildings and lands.  The basic value is the probable rental yield per sq. ft.  per month of residential properties.  For fixing the basic value, instructions have  been issued to adopt  the rent obtained per months for newly constructed residential R.C.C. buildings measuring 1000sq.ft.  and to convert it into rental value per sq.ft.

2.       Depreciation :

The following discount depending on the age of building  should be given towards depreciation.

                 Upto  5 years                 …..                   No discount

                 From 5 to 15 years         …..                   10%

                 From 15 to 25 years       …..                   15%

                 Above 25 years              …..                   20%

3.       Occupation :    

It has been decided to provide discount of 30% in respect of buildings occupied by the owners  themselves.

4.       Nature of building :

Buildings are broadly classified as thatched, tiled and R.C.C. ones.

For RCC Buildings                                                                 .....                   No allowance

For tiled, Ac sheet and GA sheet, etc. roof buildings                 .....                   25%

For thatched roof buildings                                                      .....                   50%

5.       Ceiling:

The overall enhancement of tax in quinquennial revision should not be exorbitant as to cause, serve hardship to the assesses.  Therefore, the following ceiling is fixed for the enhancement of taxes consequent on the quinquennial revision of property tax.

 Residential Buildings                      :   Not exceed  25%
(owner occupied)                               

 Residential Buildings                      :   Not exceed  50%
 (Rented)

 For Industrial Buildings                    :   Not exceed  100%

 For Commercial Buildings               :   Not exceed  150%
 Property Tax Assessment

                                                                        ............................ Town Panchayats

Form for Property Tax