Shock: BMC plans 41.5% tax on annual rentals

Extra property tax will apply to leases registered after April 1; rentals set to zoom  
You’ll have to pay nearly Rs 50,000 as annual tax on Rs10,000 monthly rent

MUMBAI: House rentals in Mumbai are set for another leap, if the Brihanmumbai Municipal Corporation (BMC) has its way. It is planning to collect extra property tax to the tune of 41.5% of annual rentals from landlords, which means some of the additional tax will ultimately be borne by lessees.

With rents rising rapidly, particularly in the posh areas of the city, the BMC has decided to invoke a provision in section 115 of the Bombay Municipal Corporation Act to levy extra property tax. Under this provision, the BMC can charge up to 83% tax on half the actual rent collected from the lessee annually. This works out to 41.5% of the annual rentals. For commercial property, this percentage can go up to 112%, municipal commissioner Jairaj Phatak said.

What this means is that if you have let out your flat for Rs10,000 a month, you will be liable to pay about Rs49,000 per annum to the BMC.

Phatak said: “Rents are high in the city and even in the suburbs they are shooting up. Property owners earn huge amounts as rent and pay a pittance to the BMC as land rent or property tax. The BMC has been charging them subsidised rates, which is not logical.”

To ensure all property owners who let out their properties show the actual rent and pay taxes as per rules, the BMC has contacted the state government’s registration department.  

The BMC has intimated Yashvant Kerure, inspector-general in the department, to provide information about registered leave and licence documents, Phatak said.

The provision will come into force only for agreements registered after April 1, 2008, Phatak said, but the programme will continue through the year and anyone caught evading taxes will be punished under the BMC Act.

Joint municipal commissioner V Radha said there were 3,32,878 properties registered in Greater Mumbai. This is not the number of apartments, but the number of buildings or societies. The break-up is: 81,295 in the city, 1,64,653 in the western suburbs, and 82,665 in the eastern suburbs.

Radha said the change was part of the BMC’s move to reform property taxes and bring in uniformity, transparency, and simplicity. The BMC has also proposed to switch to a capital-value-based system of calculating the property tax, where the levy will be decided on the basis of the age, the usage, location, and the ratable value of the property. This is pending with the state cabinet.

Asked what action would be taken against those who evade the tax, she said, “If anybody does not pay the tax as per the provisions, the BMC will first send a notice for recovery. Thereafter, the BMC will attach the property and auction it in the proper manner. After the auction, if some tax remains unpaid, the property owner will be prosecuted.”

m_pandurang@dnaindia.net