With several petitions filed in the Bombay High Court (HC) by property owners alleging that the Brihanmumbai Municipal Corporation (BMC) had wrongly calculated and collected property tax in the city, civic body has now set-up a committee to review the existing rules of property tax collection and form a new set of rules by April 2015.

Headed by the deputy municipal commissioner of the assessment and collector department, the committee includes the head of the department, three assistant commissioners each from the island city, eastern and western suburbs along with law and tax consultants.

After the civic body changed the property tax system from rent value to capital value in 2010, the new formula for calculating tax was set as built-up area (BUA) x Ready Reckoner Rate (RRR) of the property. This formula has been used to collect taxes since 2013 with arrears dating back to 2010.

While the corporation claims the new system brought parity in tax payments across Mumbai, property owners complain of glitches and lack of transparency in calculation and collection. Subsequently, several petitions filed in the HC challenging the new system stated that the civic body was wrongly calculating and collecting property tax on BUA instead of the carpet area (CA), as was the previous practice as per the provisions of the Mumbai Municipal Corporation Act, 1888.

“While we aim to frame rules that are tax-payer friendly, we have observed several imbalances in the rules that are also preventing us from maintaining revenue neutrality. Since property tax is one of the main sources of revenue for the civic body, we will review the rules to prevent losses,” said Ramesh Arote, assessment and collector, BMC.
Stating that it wanted to curb revenue losses, the civic body had proposed a new formula for calculating tax — “Carpet Area x RRR x 1.2%” earlier in July. The proposal was, however, rejected by the standing committee members of the civic body, who criticised the cash-rich corporation for failing to relieve the burden on property owners in the city. In 2014, the corporation expects to add around Rs 2,260 crore to its coffers by collecting property tax.