Bill to alter property tax system okayed

The Maharashtra Assembly on Saturday passed the Bill to allow the Brihanmumbai Municipal Corporation to shift  to the capital value base property tax system from the present ratable value system.

The Bill will become a law once the legislative council gives its nod to it, which is expected on Monday. An obvious fallout of the new law would be that it would increase the property tax bill for those who live in the island city and reduce the burden on those who live in the suburbs.

However, those whose tenements are less than 500 sq ft will continue to pay the tax at the present rate.

Currently, property tax in Mumbai is charged on the ratable value (ratable value is fixed on the rent a property can fetch).

However, as rents are freezed according to the Rent Control Act of 1948, there has been no revision in the ratable value since then.

This system will put those living in the island city in an advantageous position as despite property prices skyrocketing in South and South-Central Mumbai, ratable value of properties was never revised.

Those living in the suburbs have to pay higher property tax as in the year which the property had been assessed for tax purpose, the ratable value was much higher compared to the properties in island city where rent is freezed at the 1948 levels.

Any attempt to change the property tax structure is being opposed by the elected representatives from the island city as they fear that they will have to face a backlash from nearly 2 million residents of 12,000 properties which are protected by the Rent Control Act.

These properties, which are known as Chawls, are mostly inhabited by the lower-middle class families whose bread-winners are employed in Mumbai's mills,  port trust, police, BMC or in small trades like plying taxi,  running tobacco shop, etc.

However, the state government was forced to shift from the ratable value system to the capital value system as it was an important pre-condition for getting grants under the central government's Jawaharlal Nehru Urban Renewal Mission.

After the Bill was introduced in the state legislature last year, it was sent to a joint select committee of both the Houses as elected representatives from both the ruling and Opposition coalitions wanted safeguards to be introduced in the Bill for those living in the Chawls.

Congress MLA from Khetwadi in South Mumbai and a member of the joint select committee Bhai Jagtap said,  "As we wanted to protect the interests of lower-middle class and middle class residents of these Chawls, the property tax structure is not being changed for those who are living in tenements of up to 500 sq ft.

The amendment suggested by the joint select committee was accepted by the government and it is now part of the Bill passed by the Assembly."

The other major highlight of the Bill passed by the Assembly is that even in the case of properties of more than 500 sq ft, property tax will not be more than double of the exisiting property tax burden for five years and it could not be increased by more than 40 per cent for next five years.