The municipal corporation has revised the base for calculating property tax to carpet area from the current built-up space system

The Brihanmumbai Municipal Corporation (BMC) has approved the revision in the structure of property tax for Mumbai, the country's most expensive real estate market. The standing committee of the municipal corporation, in a special meeting held on Thursday, approved the revision in the base for calculation of property tax to carpet area from the current built-up space.

The move is expected to increase the property tax collection by 14.5% in 2015-16, against around 27% estimated as per old rules.

The revision will be applicable for the next five years with effect from April 1, 2015. The revision in property tax rules will help the civic authority collect revenue worth Rs 4,563 crore in 2015-16 (April-March).

With the old structure based on builtup area, BMC is estimated to collect a total of Rs 3,984 crore for the financial year 2014-15.

As per the old tax structure, BMC was estimated to collect revenue of Rs 5,077 crore in next financial year of 2015-16, an increase of Rs 1,093 crore, while the revised rule will fetch Rs 579 crore in property tax.

Under section 128 of the Mumbai Municipal Corporation Act, the civic authority is required to approve a new tax only on or before the 21st day of March.

However, March 21 being a holiday for Gudi Padwa, the new tax formula had to be cleared by Friday, March 20.

In the absence of an approval for the revised structure, property owners would have been burdened with much higher taxes.

The civic authority has eased the number of categories of property tax assesses to five from the earlier 21.

Of the revised categories, the tax collection from residential properties is estimated to increase by Rs 155 crore or 11.7% to Rs 1,475.22 crore. All the residential properties in existence before March 31, 2015, with size of less than 500 sq ft, will be levied property tax with a ceiling of 40%.

Under the new categories, property tax will be levied on all commercial properties at the same rate.