Mumbaikars, be ready to shell out extra 20% on property tax

In order to bring uniformity in the property taxes levied in the suburbs and in south Mumbai, The Brihan Mumbai Municipal Corporation had introduced a new tax system from rateable to capital value in 2010 based on the built-up area, but was strongly opposed by all sections of the society, especially the residents of south Mumbai who enjoyed the ready-reckoner benefits but were paying property taxes on the basis of prevalent meagre rents. The residents of the suburbs of Mumbai were, however, paying higher property taxes.
The BMC is finding it increasingly difficult to refund a whopping Rs. 1,300-crore in property tax to those tax payers who paid their taxes during 2010-2014; the civic body has decided to tweak the existing tax formula to evade reimbursement to the affected.
Including the built-up area in the capital value-based property tax formula was opposed by the BMC’s corporators across party lines then. Citizens had also challenged this in the Bombay High Court. While the HC had asked the BMC to calculate the property tax on the carpet area till a decision is arrived at, citizens were given a choice whether to pay according to the controversial formula or the interim formula. Although most people paid as per the new formula, if the BMC continues accepting tax payments based on the interim formula, it would have to incur losses to the tune of Rs. 1200 – 1300 crore.
Further, in 2015, the BMC came up with a new formula by adding the factor ‘1.2’ in the calculation. The Standing Committee as well as the High Court demanded to know the basis of the formula and its legal validity. The civic body then sought the advice of Attorney General.
Finally when the Attorney General has given its opinion, the BMC has tabled the proposal where it tweaked the property tax formula in the name of revenue neutrality and will now charge 20% added tax from citizens.