Property Tax is one of the main sources of
internal revenue of the Urban Local Bodies. As
the property tax is determined on the basis of
annual valuation of lands and buildings, the
entire process of determining property tax is
solely dependent on assessment of lands and
buildings.
PRESENT SYSTEM OF ASSESSMENT OF LAND AND
BUILDINGS: Presently in the Urban Local Bodies of this
State the following two systems of assessment of
lands and buildings are followed:
Annual Rental Value (ARV) System: In this
system tax is calculated on annual rent that is
actually or reasonably be fetched by a property.
Here Annual Rent (AR) = Monthly actual or
reasonable rent X 12. In this system Annual
Value (AV) = AR minus x% (in case of Kolkata
Municipal Corporation value of this x is 10%)
statutory deduction for maintenance. A
percentage of AV is determined as the annual
Property Tax. In case of Kolkata Municipal
Corporation this tax = (AV /600 + 10)% of the AV
subject to minimum of 11% and a maximum of 40%.
Capital Value Method: In this system tax is
calculated on Annual Value derived from cost of
construction added to cost/ market value of the
land. Here AV = (Construction cost + Market
value or cost of the land) X a percent as laid
down in the statute minus statutory deduction.
Annual Tax = AV X a percentage of AV. In Kolkata
Municipal Corporation AV of vacant land is
determined at 7% of the market value of the
land.
FLAWS IN THE EXISTING SYSTEM OF VALUATION:
Since enactment of the Calcutta Municipal Act,
1923 these two systems are being followed for
assessment of lands and buildings in the
municipal areas. With growing rate of
urbanization and change in the socio-economic
scenario the flaws in these two systems are
being surfaced, and due to these flaws the
system of assessment of lands and buildings is
getting more complex and as a fall out the rate
of collection of Property Tax is dwindling and
simultaneously the scope of tax management is
growing.
These flaws are as follows:
Flaws in Annual Rental Value (ARV) System:
Subjectivity: "Reasonable Rent" is a
completely subjective term, and creates
considerable scope for using discretion at even
lower level.
Discrepancy: This system creates wide spread
discrepancy by placing similar properties in
dissimilar tax pattern.
Non transparency: Non transparency of this
system leads to mutual mistrust and
misunderstanding. Apart from this the system
creates ample scope of tax management and entry
of middleman in the system.
Wastage of time of officials: Officials remain
busier in arguing with the tax payers,
cumbersome and lengthy hearing process and file
/ document management, than to do the duty
related to tax administration.
Non reflection of actual revenue potential:
Subletting, subdivision and collusive rent have
been hiding the actual revenue potential. Apart
from long term tenancy and Rent Control
properties lead to low valuation for low rent.
Flaws in Capital Value (CV) System:
Limited availability of sales data and
unregistered instruments.
Under reporting of Transaction Price
especially for old buildings.
Freezing of Tax base.
Need for qualified staff to assess cost.
Uncertainty of what assets should be covered.
Scope for subjectivity and discretion and
hence non transparency.
Inequity between similarly placed properties
assessed at different points of time. Subjective element of these systems leads to
non-transparency, wastage of time of the civic
personnel in cumbersome processes, and above all
difference of opinion leading to excessive
litigations, and thus wastage of efforts of
civic personnel and fund in fighting the court
cases. In this situation to ensure a dynamic process of
a transparent tax administration a decision has
been taken to switch over the system of
valuation of properties in Urban Local Bodies to
Unit Area System of assessment.
Design of Unit Area System:
One time in-house work in every five years to
bring equality at macro level at first.
Determination of valuation by an independent
Committee namely the Municipal Valuation
Committee.
Division of all wards in varying number of
sub-wards/ blocks depending on basic
infrastructure, in broad based manner, after
considering the views of general citizens.
Categorization of such sub-wards/ blocks on
the basis of available infrastructures and
defined factors.
Grouping the sub-wards/ blocks of identical
and similar in nature of whole area of the Urban
Local Body in same set.
Putting Base Unit Area Value, i.e. Base annual
value per sq. ft. to properties within a grade
of sub ward/block with the help of revenue
simulation taking into consideration the
existing revenue base. In this way similarly
located all properties will have similar Base
Unit Area Value. This will be publicly
communicated.
Fixing predefined and publicly proclaimed
multiplicative factors (from 0.5 to 8) to
determine the actual value of the property, by
increasing or decreasing the Base Unit Area
Value depending of condition of individual
property. For fixing multiplicative factors the
mandatory parameters of type of location, use,
age structure and occupancy status shall bed
considered, and apart from this there exist
provision for considering such other parameters
as may be considered necessary by the Municipal
Valuation Committee.
Publication of the scheme, after considering the
views of general citizens, for the purpose of
specifying Base Unit Area values of lands and
buildings under all classes of areas within the
Corporation.
In this system the annual value of a land or
building shall be the amount arrived by
multiplying the total area of land and/ or
building by the Base Unit Area value of such
land and/ or building.
A percentage of such annual value shall be fixed
as the annual Property Tax.
