Let us kill Mumbai with highest property tax in the World

The present system of arriving the Municipal taxes is on the basis of Rateable value, is based on standard Rent. The Rents were frozen and as per the section 154 of B.M.C. Act, as interpreted by the Hon’ble Supreme Court, the rent means the Standard Rent or the Rent at which the Property was first let out and that should be the basis for fixation of the Rateable value. As rents were frozen the Rateable value is law and hence the standing committee of Mumbai Municipal Corporation has increased the taxation from 11.5% of the Rateable value in 1945 (Prior to Bombay Rent Act, 1947 coming in force onwards) to 112.5% of Rateable value for Commercial premises with metered water connection and at the rate of 320.5% of rateable value for Commercial Premises, which have non metered water connection.

In Mumbai, the Municipal Taxes are the highest in the world. Residential Municipal tax is @ 87.5% of Rateable value with water meter, and @185% of Rateable value with properties without water meter. Commercial Municipal Tax is @ 112.5% of Rateable value with water meter, and @ 320.5% of Rateable value for properties without water meter. In addition, there is repair Cess for old buildings ranging from 87% to 1160% of Rateable value.

These tax rates are applicable on standard rent basis. However, recently in view of Sec.3(1) (b) of Maharashtra Rent Control Act, 1999, Properties let out to banks, Multinational, Consultants, Public Sector undertakings are excluded from the purview of Maharashtra Rent Control Act and without the Sanction of the Standing Committee of BMC, the Assessment Department is levying these highest rates of tax on contractual rent (and not deemed standard rent ) received by landlords. The taxes are several times more than actual rent fetched by landlords.

According to the submission in a report to standing Committee on 4^th December 2002, stating at present out of 2,51,212 properties, 1,82,279 properties data is stored in the computer and present Municipal taxes collected is Rs. 745.22 crores. The proposed tax @0.3% tax on capital value basis would be Rs. 2.50 to Rs. 4.50 per month for residential properties and @ Rs.10 to 18 per sq. ft. per month for commercial properties in South Mumbai. Between Rs. 1.25 to Rs. 2.50 per sq. ft. per month for residential properties, Rs. 5 to Rs. 10 per sq.ft. per month for commercial properties in suburbs, Rs. 0.65 to Rs. 1.25 per sq. ft. p.m. for residential properties and Rs. 2.50 to Rs. 5 per sq. ft. p. m. for commercial properties for extended suburbs.

If the rates applied to the properties identified by BMC, it crossed Rs. 5000 crores revenue to BMC. The report of Tata Institute of Social Sciences for arriving at Municipal Taxes on the basis of capital value as suggested to charge Municipal Tax at the rate of 0.1875% and then increase gradually, and on 5^th year charge @ 0.3%. But BMC has straight away on the first year proposed to the standing committee to change Municipal Tax at the rate of 0.3% against the recommendation. Even from 0.1875% to 0.3% the increase in 5 years would be 1.6 times.

A flat of 950 sq. ft. will attract Rs. 5000/- p. m. for property tax and maintenance in suburbs. It will be more in South Mumbai specially towers with swimming pools. In all Rs. 60,000/- and above per annum will be recurring cost of new flat in suburbs and much more in South Mumbai.

The tax structure will certainly effect the decisions of property purchases and lane to own and let out will be closed forever. Since taxes will be more than fair market rents.