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January 4, 2021

Mumbai BMC to restore tax on less than 500 square feet housing units

by CA Shivam Jaiswal in Circular and Notifications

Mumbai BMC to restore tax on less than 500 square feet housing units

Property tax is the amount that is paid by the land owner to the municipal corporation or the local government for his/her area. The tax must be paid every year. Every property is an asset which is taxable, and the property tax is an annual amount paid by a property/land owner to the government. This tax could be paid either to the local state government or Municipal Corporation, depending on government policies.

Who is required to pay property tax in India?

  • Anyone who owns a property has to pay property tax to the government authorities to avail of basic civic facilities available in and around the property.
  • However, certain categories of properties or owners are exempt from paying tax or are required to pay at a lower rate compared to others. For instance, typically, agriculture land or property used for worship are exempt from paying this tax. Similarly, there is a rebate for property owners who are senior citizens, women, disabled or ex-serviceman, among others.
  • Late payment often attracts a fine and interest based on the amount due.
  • The liability of paying the tax rests on the owner of the property and not on the occupier.
  • It is important to note that income payable to the income tax department under the head ‘income from house property’ is distinct and different from the payment of property tax to the municipal authorities.

Some municipal corporations provide certain exemptions from payment of property tax based on factors such as age (super senior citizens), location (famine-affected areas), net income of the individual, type of property, etc. It is best to thoroughly check with the local administration for such details and assess the value of the property with caution.

BMC had exempted houses up to 500 square feet from property tax earlier this year

In February 2020, the civic body started issuing Property Tax bills for the year to Mumbaikars, however, the department did not send property tax bills to those societies which have houses up to 500 square feet.

The proposal was aimed at benefiting over 14 lakh households across the city. The BMC also approved a proposal for 60% concession in property tax for houses measuring between 501 sq ft to 700 square feet.

Mumbai Civic body to restore tax on less than 500 square feet housing units

Dwelling units in Mumbai of less than 500 square feet will soon attract higher property tax than in the previous year.

The state legislature while amending the BMC Act had allowed the waiver of only general tax. However, instead of waiving only the general tax, BMC by mistake waived seven other components as well.

This year BMC realised their mistake and informed the government about it. The Municipal Commissioner said that they cannot repeat the same mistake every year and so this year’s bill will reflect the charges for the other seven components.

How much did this mistake cost BMC?

There are 1.85 lakh dwelling units in the city that are less than 500 square feet in size. The BMC annually earns Rs 360 crore from these units as property tax, which constitutes eight components including general tax. Waiver of the other seven components has cost the BMC Rs 285 crore. It works out to roughly Rs 150 per unit.

The Municipal Commissioner said that BMC is considering recovery of the excess amount waived off last year. They are yet to take a decision, and if they do recover the dues it would be at a later date.

It is important to remember that the property tax adds to the municipal funds, out of which salaries of municipal workers, such as those who sweep the road or maintain the sewage system of the area, are paid out. If someone fails to pay property tax on time, some municipal corporations initially give a show cause notice to recover the dues. If someone fails to pay it even after the notice, the authority can recover the same by way of attachment of property, bank account, rent and all moveable properties, but such steps are typically taken in extreme cases. Wilful default may also attract imprisonment. Moreover, there is a penalty for late payment or default. One will have to pay a fine in the form of penal interest on the amount due. The rate depends on the respective authority.

So, do make sure you pay your property tax on time.

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