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WELCOME

WELCOME. 18-10-2014. New System of Property Tax in Municipalities in Telangana State Presentation by : M. Prasada Rao , IAS ( Retd .) Former Commissioner & Director of Municipal Administration. Main sources of income to ULBs. Taxes Non-taxes Assigned revenues i. Entertainment tax

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WELCOME

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  1. WELCOME 18-10-2014

  2. New System of Property Tax in Municipalities in Telangana State Presentation by :M. PrasadaRao, 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 Considerable discretion to the assisting authorities. Large disparities in the amount of tax for similar buildings used for similar purpose. Determination of Annual Rental Value varies with Assessing authorities. Complaints of Arbitrariness in the Assessment of Property tax.

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

  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 • Division of Municipality into zones. • Classification of buildings based on type of construction. • Further classification of buildings based on nature of usage. • Survey of prevailing rental values of 20% of rented buildings. • Preparation of draft notification in Form – A • Consultation with State Property Tax Board.

  19. Contd.. • Publication of the draft notification in Form – A • Consultation with elected representatives • Consideration of the objections and suggestions received from the public • Publication of the final notification in Form-’A’. • Preparation of property tax assessment list of buildings in Form-’B’.

  20. Contd.. • Preparation of special notices • Issuance of public notice regarding levy of property tax for the first time. • Service of special notices. • Receipt of Revision Petitions. • Disposal of Revision Petitions. • 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.. • A.C. Marriage Halls / Function Halls • Non-A.C Marriage Halls • Petrol Bunks • Cellular towers • Hostels • 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

  33. Contd..

  34. Contd..

  35. Survey of Data relating to prevailing rental values of 20% of rented buildings 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:

  43. Comparative statement showing MRV fixed per sq.mt of plinth area from 01.04.2002

  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.. • Basis for Assessment of Property tax on buildings. • Proper filling up of various columns is very important. • Preparation of Form-’B’ may be started as soon as division of Municipality into zones is completed. • Teams to inspect the buildings and fill up columns from 1 to 26. • 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 • Commissioner to sign the assessment list for each ward as soon as it is completed. • 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

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