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Complaints of flaws & confusion as new property tax bills come in
January, 31st 2013

Almost a month after the BMC issued bills for property tax under the new capital-value based system, property owners and activists have pointed to a lack of transparency and several flaws in tax computation. There are also major objections to the demand for paying arrears from April 2010.

Suryakant Shroff, a retired counsel with HDFC, has been asked to shell out over Rs 1 lakh as tax after his building was classified as 30 years old and made of reinforced concrete cement (RCC).

"My building is 90 years old and is a load-bearing structure. In such case, the civic body has fixed some discount and the tax drops substantially. I am planning to point out this flaw and have the civic body rectify it before paying up," said Shroff, a resident of Gamdevi.

Centre Point Condominium, a commercial complex in Lower Parel, has been asked to pay almost Rs 50 lakh, including Rs 21 lakh for 2012-13 and arrears of Rs 14 lakh each for the past two years under the capital value system that is based on the property's market price. Till 2010, the complex was paying Rs 7 lakh as property tax.

Objecting to the notice, Rajat Vora, secretary of Centre Point, said: "The civic body took five years to frame the tax laws, but they want us to understand the complex system within 21 days and pay this huge sum within March 15. Moreover, the civic body is contradicting itself. They have charged us tax with retrospective effect from April 2010, but have computed the tax according to the 2013 ready reckoner rates."

At Nariman Point, commercial building societies like Mittal and Maker Chambers are claiming that the tax has jumped up to five times as against the cap of three times stipulated in the new system. "The maximum tax rate is now Rs 5-11 per sq ft per month (psfpm) against the maximum of up to Rs 3 psfpm we had to pay under the rateable value system (based on notional rent). We have also objected as it was supposed to be levied on carpet area but the BMC has computed it on built-up area," said an office owner at Mittal Chambers.

Utsal Karani, secretary of NGO Janhit Manch, said the BMC has put the new rules under 'News and Events' on their website, making them difficult to find and raising questions about the civic body's intention to bring transparency to tax rules. Karani also objected to the short time of only about a month given to pay lakhs as tax computed over the past three years.

A particularly disgruntled section is property owners who have leased their property without a clause asking tenants pay any future government taxes.

In the new system, the BMC has not made any distinction in the tax for owner-occupied and leased property. A landlord said he is facing objections from his tenant on Marine Drive.

"The tenant of who has been occupying a 2,000 sq ft apartment for several decades is refusing to pay as he believes we are fleecing him by asking him to pay tax at Rs 2 per sq ft per month against the 50 paise per sq ft he was paying earlier. On the one hand, we are not allowed to increase rents to the prevailing market conditions under the provisions of the Maharashtra Rent Control Act and, on the other hand, though it is incumbent on the tenant to pay tax through us, the civic body has not allowed him to voice his objection," said the person, who has been slapped a bill of over Rs 25 lakh for two properties on Marine Drive.

Yashwant Dalal, president of the Estate Agents Association of India, said the format sent with the bills in which citizens have to give their objections itself is flawed. First, the citizens are expected to agree to whatever the bill says. "How can I agree if the bill has made an error on the area or the age of the building or, importantly, if the ready reckoner rates applicable in my area are wrongly applied for computing tax?" said Dalal.

"The moment I sign on this form, which comes along with the bill, it means I am bound to pay the tax mentioned in the bill. Knowing how the civic body functions, forget about the error being rectified, it will be months before they reimburse the additional tax with interest that I have paid," he added.

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