Instead of the Annual Rental Value (ARV), the new mechanism factors in the Market Capital Value of the property as the basis for calculating the tax.
Given the indications, the heft of property tax on the city residents is poised to increase by leaps after the elections to the Telangana Legislative Assembly.
The increase would be part of the financial reforms in urban local bodies, being pushed by the Central government across various cities, in order to make them self-sufficient in terms of revenue generation.
In Telangana, the property tax reforms for residential properties have already been implemented in several municipalities and corporations outside the Greater Hyderabad Municipal Corporation. The newly constituted municipal corporations on the peripheries of the city have introduced new rates, which, in fact, appear higher than those within the city.
“We are paying more than the property owners in the city; yet, the facilities provided are pathetic. Sore over this, many property owners here have stopped paying the tax,” said Surender Reddy (name changed) an owner from the Nizampet Municipal Corporation.
What have changed are not the rates of property tax, but the calculation mechanism in the corporation. Instead of the Annual Rental Value (ARV), the new mechanism factors in the Market Capital Value of the property as the basis for the calculation.
According to the existing mechanism, ARV is calculated based on the size of the property in terms of square feet of built up area.
Earlier, the rates were highly discretionary and dependent on the assessment by the revenue staff such as bill collectors and tax inspectors. A large number of property owners, in probable collusion with the staff, escaped with as low as 10 to 30 paise of tax per square foot.
Recently, the GHMC corrected this anomaly by introducing largely uniform rates across the city. Accordingly, ₹1 is the rate per square foot in all the circles except Jubilee Hills and Banjara Hills where the charge has been fixed as ₹1.25 per square foot. Besides, self-assessment has been introduced for new properties.
“We are enforcing the new rates only upon new mutations, and not on the existing assessees. They come into force only when the property changes hands by way of sale or inheritance,” said an official.
With the implementation of the reforms, the registration value fixed by the government from time to time will become the basis for calculation. In Nizampet, for example, 0.12% is fixed as the rate on the capital value of the property. This will result in wide variations in the tax payable depending on the location of the property.
For example, for a 1,000 sq.ft. flat in Banjara Hills, property tax would amount to ₹3000 without GST at the existing rate calculated on the ARV.
Under the new method, based on the existing market value of ₹64 lakh, and at a hypothetical rate of 0.12%, the same owner will have to shell out ₹7,680 tax annually, which is over double the existing tax.
Needless to say, the rate in city is likely to be much higher than those being enforced in peripheral municipalities, which means the tax burden would be much higher.
