SAG okays 1.2 factor in property tax

With the state advocate general (SAG) verdict going in its favour, the civic body may include the 1.2 multiple factor in its property tax bills. This means there will be no benefit for people who were hoping for further reduction in their property tax bills of the four-year period 2010-14.

The SAG in its verdict said the decision to charge the additional factor to avoid massive revenue losses was legitimate.

Corporators had asked the civic body to seek the opinion of SAG on the 1.2 factor in the property tax system. Accordingly, the SAG held three meetings with top civic officials and gave his legal opinion early this year. In his opinion, the SAG has said that BMC’s decision to charge 1.2 factor in the property tax system was logical as per the municipal rules.

The BMC had said the removal of 1.2 factor used for multiplication of ready reckoner rates was not feasible, as it would lead to further reduction in revenues.

While implementing the capital value based system in the fist four years of 2010-14, the BMC had calculated the property tax on the built up area of the flat. However, the Bombay high court directed the BMC to see whether the formula to calculate the property tax can be calculated on the basis of carpet area. Following this, the BMC submitted a new formula based on carpet area, but to balance out the amount, the civic officials proposed to multiply the ready reckoner rates by 1.2 to keep the rates same. However, corporators had demanded to remove even the multiple rate of 1.2 so that people benefit.

“While implementing the capital value based system from 2010, we had anticipated around 12 per cent reduction in property tax collections. However, if we remove the 1.2 multiple factor, it will further drop to 10 per cent more, making it a huge 22 per cent reduction,” said a senior civic official.

Considering the loss of Rs 300 crore every year, BMC property tax revenues will be dropped by Rs 1,200 crore in the four-year period from 2010 to 2014 and the refunds will have to be paid from the estimated revenues of 2014-15, said civic officials.

“Under the new system, the property tax of many properties has already come down. There is no point in slashing their taxes further causing a dent in revenues,” said the official.

From the year 2015, the BMC has already started implementing the formula of ready reckoner multiplied by carpet area for the property tax system.