The MCD has proposed a 5% hike in property tax across all residential and commercial categories. The announcement, made by MCD commissioner K S Mehra in his budget speech on Wednesday, however ran into trouble with the civic bodys political brass saying they would not pass any increase in taxes for residential properties.

As per the proposal, tax rates for residential properties will rise from 12% to 17% for A and B categories, from 11% to 16% for C, D and E categories and from 7% to 12% for F, G and H categories. MCD has divided properties into eight categories on the basis of location.

No change for high-end hotels, malls

MCD commissioner KS Mehra proposed a reduction in the rebate on timely payment of property tax from 15% to 10%. There will be no additional rebate on properties up to covered area of 100 sq m, co-operative group housing societies and aided schools, he said. The reduction in rebate is also likely to increase the amount of tax paid by Delhiites.

A 5% hike has also been mooted for residential properties of government companies and statutory corporations, commercial properties of all categories and residential farm houses.

No change is proposed for special non-residential properties like hotels of three star and above, malls, AC gyms and clubs with swimming pools as they are already giving the highest possible 20% tax, Mehra said.

Among the properties exempted from the hike are those of the Airport Authority, non-residential farmhouses and special non-residential properties. The political brass of MCD, which goes to polls in 2011, claimed it would not allow any increase in taxes in residential areas. Besides , the proposed increase in taxes, implementation of the third municipal valuation committee might add to the tax burden of Delhiites.

Just as Mehra ended his budget speech, standing committee chairman Chandolia announced that the tax hike proposal will be reject outright. This despite the fact that MCD has been struggling to raise its revenue collections and has very few options through which to do it.

There will be no debate over increasing taxes levied in residential areas though we might consider increasing taxes in commercial areas. The reduction in the rebate for timely tax payments is also not right. I do not know why the commissioner has done this. I would prefer that more properties are brought under the tax net rather than burdening people who are already paying their taxes, said Chandolia.

He pointed out 4,816 properties had been identified as having a tax liability of Rs 5 lakh per year. We can get Rs 712 crore if these properties are targeted, Chandolia said.