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Title: New%20System%20of%20Property%20Tax%20in%20Municipalities%20in%20Telangana%20State


1
WELCOME
18-10-2014
2
  • New System of Property Tax in Municipalities in
    Telangana State
  • Presentation by M. Prasada Rao, IAS
    (Retd.)Former Commissioner Director of
    Municipal Administration

3
Main sources of income to ULBs
  • Taxes
  • Non-taxes
  • Assigned revenues
  • i. Entertainment tax
  • ii. Surcharge on stamp duty
  • iii. Profession tax
  • Non-plan grants
  • Plan grants (16 items)

4
Property Tax
  • Single largest source of revenue to the ULBs.
  • Constitutes about 20 of total municipal revenues
    of ULBs during 2013-14
  • Constitutes about 43 of internal revenues of
    ULBs during 2013-14.

5
System of Assessment Prior to 1989
  • Basis for fixation of Annual Rental Value
  • Fair Rent fixed or fixable in respect of
    buildings covered by Rent Control Legislation
  • Rent received for the building
  • Rent fixed on hypothetical basis in respect of
    buildings where Rent is not fixed.
  • Rent fixed on hypothetical basis in respect of
    owner occupied buildings

6
Problems faced in fixation of Annual Rental Value
  1. Considerable discretion to the assisting
    authorities.
  2. Large disparities in the amount of tax for
    similar buildings used for similar purpose.
  3. Determination of Annual Rental Value varies with
    Assessing authorities.
  4. Complaints of Arbitrariness in the Assessment of
    Property tax.

7
Amendments to Municipal Laws in 1989
  1. Amendment to AP Municipalities Act, 1965
  2. Amendment to Hyderabad Municipal Corporations
    Act, 1955
  3. AP Municipalities (Assessment of taxes) Rules,
    1990.
  4. Hyderabad Municipal Corporations (Assessment of
    property taxes) Rules, 1990.

8
Property Tax - Components
  • a tax for general purpose
  • a water tax
  • a drainage tax
  • a lighting tax and
  • a scavenging tax

9
Rates of Property Tax
  • Property tax and library cess shall not exceed
  • Category Not to exceed
  • (a) Residential buildings 25
    percentum of ARV
  • Non-Residential Buildings 33 percentum
  • of ARV
  • Library cess shall be collected at the rate of 8
    paise for every rupee in the property tax levied.

10
New Property Tax System
Basis For Levy of Property Tax Annual Rental
Value Factors for fixation of Annual Rental
Value 1. Location of the building 2.  Type of
construction 3.  Plinth area 4.  Nature of
use 5.  Age of the Building
11
  • Objectives of
  • New System of Property Tax
  • To evolve a scientific method in the levy of
    Property Tax in the Municipalities.
  • To fix the Assessments in a uniform manner in
    respect of similar Buildings situated in one
    locality and used for similar purpose.
  • To reduce the discretion and to avoid
    arbitrariness in the Assessment of Property Tax.
  • 4. To simplify the Procedure of assessment

12
Contd.. 5. To make tax administration to be of
more efficient and effective in the levy of
property tax.  6. To de-Link the provisions of
Rent control Act from the method of assessment of
Property Tax. 7. To provide relief to the
buildings constructed under weaker section
Housing Scheme and to owner occupied residential
buildings. 8. To improve the resources of the
Municipalities by Restructuring the method of
assessment of Property Tax.
13
Allowances for Repairs
Age of the building Deduction allowed from ARV attributable to the building
25 years and below 10 of ARV
Above 25 years and upto 40 years 20 of ARV
Above 40 years 30 of ARV
14
Rebate to owner occupied residential buildings
40 of ARV attributable to the building
inclusive of deduction permissible for age of the
building
15
RCC Posh Buildings
  • 1. Teak wood for doors, windows and cupboards.
  • 2. Marble flooring.
  • 3. Superior sanitary and electrical fittings
  • 4. Attached bathrooms
  • 5. Difference in MRV per sq.mt of plinth area
    between RCC Posh building and RCC ordinary
    building shall be limited to 20 of MRV per sq.mt
    of plinth area

16
Non-Multistoried Buildings without lift facility
  • MRV per sq.mt of plinth area to be fixed
    separately for the following categories.
  • Cellar
  • Ground and First Floor
  • Second and Third Floor

17
Multistoried Buildings
  • Building with more than ground and three floors.
  • Rent to be fixed separately for the following
    categories.
  • Cellar
  • Ground and First Floor
  • Other Floors

18
Plan of Action for Levy of Property Tax
  1. Division of Municipality into zones.
  2. Classification of buildings based on type of
    construction.
  3. Further classification of buildings based on
    nature of usage.
  4. Survey of prevailing rental values of 20 of
    rented buildings.
  5. Preparation of draft notification in Form A
  6. Consultation with State Property Tax Board.

19
Contd..
  1. Publication of the draft notification in
    Form A
  2. Consultation with elected representatives
  3. Consideration of the objections and suggestions
    received from the public
  4. Publication of the final notification in
    Form-A.
  5. Preparation of property tax assessment list of
    buildings in Form-B.

20
Contd..
  1. Preparation of special notices
  2. Issuance of public notice regarding levy of
    property tax for the first time.
  3. Service of special notices.
  4. Receipt of Revision Petitions.
  5. Disposal of Revision Petitions.
  6. Disposal of appeals.

21
Division of Municipality into Zones
  • First Step
  • 1. Teams to be constituted for division of
    Municipalities into zones with the following
    officers
  • a) Revenue Officer / UD Revenue Inspector
  • b) Town Planning Officer
  • c) Municipal Engineer

22
Contd..
  • ii. Factors for division of municipality into
    zones
  • Provision of civic amenities
  • Proximity to markets and shopping centers.
  • Proximity to educational Institutions and medical
    institutions.
  • Proximity to banks, postal services and public
    offices.
  • Proximity to factories and industries.

23
Contd..
  • iii. As far as possible, the number of zones
    should be kept at the minimum.
  • iv. Rents fetched on main road varies from rents
    fetched on internal roads and lanes and by-lanes
    in a zone.
  • v. Sub-categorization of zones and fixation of
    separate rents has to be provided for the
    following categories
  • Buildings abutting main roads.
  • Buildings abutting internal roads.
  • Buildings abutting lanes and by-lanes.

24
Classification of the buildings based on Type of
Construction
  • Second Step
  • Classification of buildings based on Type of
    constriction
  • RCC Posh buildings
  • RCC Ordinary buildings
  • Madras Terraced / Jack Arch / stone slabs / slate
    roofed buildings.
  • Mangalore tiled / Asbestos / GI roofed buildings.
  • Country tiled buildings.
  • Thatched roof / Huts.
  • Any other building not covered above

25
Classification of buildings based on nature of
usage
  • Third step
  • After classification of buildings based on their
    type of construction, they shall be further
    classified based on nature of usage
  • Residential
  • Shops, Shopping complexes
  • Public use
  • Office complexes, public and private offices and
    banks
  • Hospitals and Nursing Homes
  • Educational Institutions

26
Contd..
  • 4) Commercial purposes
  • i. Hotels, lodges, restaurants
  • ii. Godowns and other business establishments
  • 5) Industrial purposes i.e., factories, mills,
    workshops and other industries.
  • 6) Cinema Theatres or places of public
    entertainment
  • 7) Any other usage not covered above

27
Contd..
  • Nature of Usage
  • Following additional usages may be provided
    depending on local circumstances wherever
    necessary
  • Few Examples
  • ATMs
  • Corporate Hospitals and Nursing Homes
  • Clinics, Dispensaries and Diagnostic centres
  • Star Hotels
  • Other Hotels

28
Contd..
  1. A.C. Marriage Halls / Function Halls
  2. Non-A.C Marriage Halls
  3. Petrol Bunks
  4. Cellular towers
  5. Hostels
  6. Any other usage

29
Survey of Data relating to prevailing rental
values of 20 of rented buildings
  • Fourth Step
  • Classification of buildings 6 categories based
    on construction
  • Further classification of
  • buildings 10 categories or more
    based on nature of usage
  • Maximum categories of
  • buildings available in a zone 60 or more
  • Information to be gathered for 20 of all
    categories of rented buildings in a zone /
    sub-zone to the extent of their availability or
    situation.

30
Contd..
  • Method of conducting survey
  • Bill Collectors and Revenue Inspectors to be
    entrusted with survey work
  • Introduce themselves to the Tenants of Buildings.
  • Explain the purpose of visit.
  • Leaf let has to be handed over to the Tenant of
    the Building.
  • Gathering of information relating to plinth area
    and prevailing Rental values of 20 of rented
    buildings as per nature of construction and usage

31
Contd..
  • Information relating to 20 of rented Buildings
    to their extent of their availability in a zone
    or sub-zone
  • Type of Construction-wise.
  • Nature of Usage-Wise.
  • All Zones and Sub-zones.

32
Method of Filling up Survey Format
Col.No Item Method of filling up the column
Zone No As per draft notification in Form A
Sub-Zone No As per draft notification in Form A
Nature of construction As per situation in the field
Type of usage As per situation in the field
1. Sl.No
2. Door No This column will be filled up as per Municipal Records
3. Existing Property Tax per annum This column will be filled up as per Municipal Records
4. Existing Gross MRV This column will be filled up as per Municipal Records
33
Contd..
5. Name of the Tenant This column has to be filled up after conducting proper enquiry
6. Cellar/ Ground Floor/ First Floor / Other Floors After inspection of the building, this column has to be filled up
7. Plinth Area Area arrived at by multiplying the length of the building with breadth as measured outside the basement level. Plinth area of a building includes plinth area of cellars, ground floor and all other floors above the ground floor of the building. Open balconies, open staircase, open portico without support are not to be included in plinth area.
34
Contd..
 Plinth area has to be taken separately in the following cases 1. if the construction is more than one category. 2. if the building is put to different uses. 3. in respect of multistoried buildings plinth area has to be taken up floor-wise
8. Prevailing MRV After inspection of the building, the column has to be filled up after enquiring from the tenant.
9. Remarks Any other relevant information may be noted here.
35
Survey of Data relating to prevailing rental
values of 20 of rented buildings
Fixation of average monthly rental value per Sq. m. of plinth area Based on information gathered in survey Total up the plinth area Total up prevailing MRV Arrive at average MRV per sq.mt of plinth area by dividing total monthly rent with total plinth area
  • Test Checking
  • Revenue officers, Commissioners to
    conduct test check of 10 of the buildings
    surveyed.

36
Preparation of Draft Notification in Form - A
  • Fifth step
  • Information to be contained in the draft
    notification
  • Zone No.
  • Sub-Zone No.
  • Localities / Areas included in the zone
  • Name of the locality Door
    Nos.
  • From To
  • Monthly Rental Value proposed based on
    construction-wise, usage wise.

37
Consultation with State Property Tax Board
  • Sixth Step
  • Commissioner to consult State Property Tax Board
    about monthly rent proposed per Sq. mt. of plinth
    area for levy of property tax.
  • Board to study the draft notification
  • Make a comparative study of the monthly rental
    values proposed by other Municipalities in the
    district.
  • Offer its views in the matter.

38
Publication of Draft Notification in Form - A
  • Seventh Step
  • Due consideration to be given to the views of the
    Board
  • Finalize the draft notification in Form A
  • Draft notification to contain
  • a) Division of Municipality into Zones
  • b) Monthly rent proposed per Sq. mt. of plinth
    area for various categories of buildings
  • c) Calling for objections or suggestions from
    the public within 15 days
  • 4. Draft notification to be published in the
    District Gazette and local news paper

39
Consultation with Elected Representatives
  • Eighth Step
  • Commissioner to tabulate the objections/
    suggestions received from public on the draft
    notification.
  • To hold informal meeting with Chairperson and
    Members including Ex-officio, Co-option Members
    of the Council for suggestions on the draft
    notification.

40
Consideration of the objections and suggestions
  • Ninth Step
  • Commissioner to consider the objections and
    suggestions from the public
  • Commissioner to consider the suggestions received
    in the informal meeting with Elected
    Representatives
  • Due consideration shall be given to the views of
    the Board.
  • Commissioner to record decision on the
    suggestions / objections on the tabulated
    statement
  • Commissioner may revise the zones and monthly
    rent provisionally fixed for various categories
    wherever necessary.

41
Publication of Final Notification in Form - A
  • Tenth step
  • Commissioner shall prepare a final notification
    showing monthly rent fixed per Sq. Mt. of plinth
    area in Form A
  • Final notification to contain
  • a) Division of Municipality into zones and
    sub-zones with localities and door nos.
    included
  • b) Monthly rent fixed for each category of the
    building based on construction and usage
  • Publication of the notification in District
    Gazette and local news paper.

42
Statement showing the maximum monthly rental
value fixed per square meter of plinth area in
Municipalities in the year 1992-93 and 2002-03
Residential Purpose Rs. 8-00 Rs 18-00
Shops Rs. 30-00 Rs 50-00
Public Usage
i. Offices Banks Rs. 18-00 Rs. 55-00
ii. Hospitals Nursing Homes Rs. 18-00 Rs. 26-00
iii. Educational Institutions Rs. 12-00 Rs. 24-00
Commercial Usages
i. Hotels, Lodges Rs. 14-00 Rs. 38-00
ii. Godowns Rs. 9-80 Rs. 38-00
Industrial Usage Rs. 8-00 Rs. 24-00
Cinema Theatres Rs. 7-50 Rs. 30-00
Other Usage Rs. 4-50 Rs. 20-00
43
Comparative statement showing MRV fixed per
sq.mt of plinth area from 01.04.2002
Sl. No. Nature of Usage Maximum MRV fixed per sq.m. of plinth area Maximum MRV fixed per sq.m. of plinth area
Sl. No. Nature of Usage Municipalities Corporations
1 2 3 4
Rs. Rs.
1 Residential 18.00 16.20
2 Shops 50.00 45.00
3 Offices and Banks 55.00 40.00
4 Hospitals 26.00 22.00
5 Educational Institutions 24.00 12.00
6 Hotels and Lodges 38.00 30.00
7 Godowns 38.00 30.00
8 Industries 24.00 20.00
9 Cinema Theaters 30.00 25.00
10 Other uses 20.00 19.00
44
Property Tax Assessment List of Buildings in Form
B
  • Eleventh step
  • i. Teams to be constituted for preparation of
    Property Tax Assessment List of Buildings in Form
    B with the following officers
  • Revenue Inspectors
  • Assistant Engineers
  • Town Planning Supervisors
  • Town Planning Building Overseas
  • Senior Assistants
  • Any other suitable staff

45
Contd..
  1. Basis for Assessment of Property tax on
    buildings.
  2. Proper filling up of various columns is very
    important.
  3. Preparation of Form-B may be started as soon as
    division of Municipality into zones is completed.
  4. Teams to inspect the buildings and fill up
    columns from 1 to 26.
  5. Columns 27 28 to be filled up by the
    Commissioner.

46
Property Tax Assessment List of Buildings
  • Following officers to test check 10 of the
    assessments.
  • Commissioner
  • Revenue officer
  • Town Planning officer
  • Municipal Engineer

47
Fixation of Assessment -Calculation of Property
Tax
  • Column 27 Fixation of MRV
  • Column 28 Reasons for increase
  • To be filled up by Commissioner with
    self-contained reasons.
  • As soon as one assessment book is completed,
    assistants in revenue section shall take up
    calculation of property tax.

48
Approved Assessment List
  1. Commissioner to sign the assessment list for each
    ward as soon as it is completed.
  2. Certify the correctness of the total amount of
    the property tax.

49
Preparation of Special Notices
  • Twelfth step
  • Special Notices are to be prepared as soon as one
    assessment book is completed in all respects.
  • Special notice to contain the following reasons
    for levy of property tax
  • a) Zone No.
  • b) Nature of - Plinth area -
    Nature of
  • Construction Usage
  • (1) - (2) - (3)
  • c) Monthly rental value fixed

50
Public Notice
  • Thirteenth Step
  • After completion of levy of property tax public
    notice under Rule 10 (1) of Schedule - II to be
    issued.
  • Notice to be affixed at
  • Notice board of Municipal Office
  • Notice boards of important public offices
  • Publication by beat of drum

51
Service of Special Notices
  • Fourteenth step
  • All special notices to be served before the
    stipulated date i.e. 31-3-2015
  • Method of service
  • By giving to the owner of the building by
    obtaining acknowledgement and date on office copy
    of special notice.
  • To serve on the adult member of the family.
  • To send by RPAD if the owner is a absentee
    landlord.
  • By fixing the same to the door of the building if
    the above methods are not possible.

52
Receipt of Revision Petitions
  • Fifteenth step
  • 30 days time from date of service of special
    notice is allowed for filing of revision
    petitions
  • Revision petitions shall be entered in the
    register of Revision Petitions
  • Docket sheet shall be prepared for every revision
    petition with eighteen items.

53
Disposal of Revision Petitions
  • Sixteenth step
  • Hearing of the revisions petition
  • Commissioner to record the statement of the
    petitioner
  • Speaking order to be passed by the Commissioner
  • Model speaking order is given in Annexure-III of
    the Circular.

54
Disposal of Appeals
  • Seventeenth step
  • Appeal lies to RDMA on the orders passed by the
    Commissioner
  • Appeal to be heard
  • a) if it reaches within 15 days from the date
    of receipt of orders from the Commissioner
  • b) Tax to be deposited within 15 days

55
Contd..
  • Appeal to be entered in the register of appeals
  • Docket sheet to be prepared
  • Hearing of the appeal
  • Consultation with Municipal Chairperson

56
Contd..
  • RDMA to record the statement of the Appellant
  • Speaking order to be passed by the Commissioner
  • Model speaking order is given in Annexure-III of
    the Circular

57
Levy of property tax on lands
  • Property tax shall be levied on lands -
  • a) Not used for agricultural purposes
  • b) Not occupied adjacent to the building
  • Area not exceeding three times of plinth area of
    the building including its site or vacant land to
    the extent of 1000 Sq. Mts. whichever is less
    shall be deemed to be adjacent premises of the
    building.

58
Contd..
  • Capital value of lands fixed by Registration
    Department to be the basis for levy of tax.
  • Property tax shall be levied at 0.20 of capital
    of the land
  • Assessment list of lands shall be prepared in
    Form C
  • Procedure prescribed for assessment of buildings
    shall be followed for levy of property tax on
    lands.

59
Exemptions from payment of Property Tax in
Municipalities
  1. Places set apart for public worship.
  2. Choutries
  3. Recognized educational institutions including
    hostels used for Charitable purposes.
  4. Ancient monuments not used as residential
    quarters or as public offices.
  5. Charitable hospitals and dispensaries.
  6. Burial and burning grounds.
  7. Irrigation works vested with the Government.

60
Exemption of owner occupied Residential Buildings
ARV upto
Municipal Corporations Rs.900/-
Selection and Special grade Municipalities Rs.450/-
Other municipalities Rs.300/-
61
Houses constructed for Urban Poor
  • In respect of houses constructed for urban poor,
    property tax shall be collected at one rupee per
    half-year

62
  • Judgment dt 29.12.94 of High Court of A.P.
  • Determination of Property Tax belongs to
    Commissioner.
  • Advisory Committee has no role to play.
  • ARV fixed by the Commissioner shall be limited to
    the fair rent determined or determinable under
    Rent Control Act.
  • Commissioner may fix a lesser rental value
    subject to the maximum as above.
  • Commissioner to dispose of the objections
    notwithstanding Form A notification.

63
Judgment of Supreme Court Honble Supreme Court
in Civil Appeal No. 4052 of 1996 in its judgment
dated 2.5.2001 ordered that the findings /
decision of the High Court in Point Nos. 3 and 5
as stated in the judgment under challenge are set
aside.
64
Important Observations of the Supreme Court
  1. The Act and Rules provide a complete code for
    assessment of the Property Tax to be levied for
    the buildings and lands.
  2. The fair rent determined under the Rent Control
    Act in respect of a Property is not binding on
    the Commissioner.
  3. The committee set up by the State Government has
    no statutory existence.
  4. Its recommendations are advisory and are not
    binding on the Commissioner.
  5. The provisions of Rent Control Act will not apply
    for fixation of annual rental value for levy of
    Property Tax.

65
Impact of New System of Property Tax
  1. Tax payers Acceptability
  2. Transparency
  3. Simplicity in assessment of property tax
  4. Buoyancy in revenue
  5. Reduction in corruption

66
Reasons for success of New system of Property Tax
  1. Designed by few Municipal Commissioners in 1988
    89.
  2. Peoples participation in fixation of monthly
    rental value.
  3. Extensive consultations with stakeholders at
    local, regional and State level for a period of
    two years.
  4. Training to all Municipal Commissioners and
    Staff.
  5. Absence of discretion to assessing authorities
  6. Simplicity in the entire system.

67
THANK YOU
PPT on new system of property tax in Telangana
Dt. 18-10-2014
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