Present System of Property Taxation :
The present system of property taxation is based on the principle of Annual Rateable Value method. The Annual Valuation (AV) of the property is determined after deducting 10% on maintenance and repair account from the actual annual rent realized from the property or the annual reasonable rent at which the property might have been let out from year to year.
The tax rate, under the present system, increases proportionately with the individual AV of the property and is calculated using a somewhat complex formula. It varies from 11% to 40%. However for ordinary flats the rate of tax & individual flat depends on cumulative AV of all flats in the premises. There is also provision of 50% commercial surcharge if the property is being used for commercial activities.
Issues with the current system :
There is ample scope for subjectivity and ambiguity in present system which leads to arbitrariness causing real or perceived unfairness in
the eyes of the property taxpayer (assessee).
It becomes difficult to establish reasonable rent for various types of properties since it is subjective in nature and often varies from person
As the methodology for determining Annual Valuation depends on rent received, there is a tendency to misrepresent the actual rent.
Citizens' support to the current system is rare and that leads to poor compliance.
To seek relief, the assessee often resorts to litigation causing wastage of his valuable time and resource.
There is no scope for self assessment by the assessee, as a result, the discretionary power of the assessing officials is enhanced.
Unit Area Assessment (UAA) system of property taxation :
To get rid of inherent problems in ARV system most of the cities of India have undertaken exercise for introduction of Area Based Property Tax system under different names. Here in Kolkata it is called Unit Area Assessment System.
Annual Property Tax under the UAA system is calculated on the basis of the following formula :
The entire city is divided into 293 blocks and these blocks are classified into seven categories (A to G) on the basis of market value, infrastructure, facilities etc. corresponding to each category, (viz. A,B,C,D,E,F,G) an Annual value / sqft. ie Base Unit Area Value (BUAV) is assigned, category 'A' having the highest BUAV while 'G' having the lowest BUAV. It ensures equity at the macro level of the properties lying within the same block or similar category block.
However, in order to remove hardship bustee / slum / thika-tenanted area are categorized as 'G', for the purpose of assessment, irrespective of their geographical location under any block or category. Similarly, all recognized RR colonies including settlements under Govt. notified EWS and BSUP Schemes have been categorized as 'E' irrespective of their geographical situation under any block or category unless it belongs to a block whose category is lower than that of 'E'.
To account for the wide heterogeneity among properties within a block, Multiplicative Factors (MFs) are introduced. MFs would account for variations in terms of size, purpose of use, age of the property, location of the property within the block, nature of occupancy and type of structure, which would be clearly notified and used to increase or decrease Base Unit Area Values of different properties as applicable or to keep it same.
As opposed to the current system, a flat tax rate percentage within min-max limit of 6% to 20% would be used and notified in the UAA system which does not depend on the Annual Valuation of the property. Already tax rate for developed bustee is fixed at 8%. Also, in this system, rate of tax of individual ordinary flat will not depend on cumulative AV of all flats in the premises concerned.
Further, before finally fixing the block division and categories a draft notification was published in official Gazette to get suggestion and objection from the citizens. This facility will similarly be extended to the citizen while fixing category wise Base Unit Area Value(s) of properties.
To determine such divisions of blocks with different categories, concerned BUAV, MF values, Tax rate etc. a Municipal Valuation Committee is formed which is constituted by expert from different fields of the society. Similarly an Anomaly Review Committee was formed to consider citizen's feedback towards such categorization. Such categories and values will be revisited once in five year.
Assessment of property is done by the assessee himself as opposed to the prevalent system where assessment inspectors are responsible for assessment. All parameters for calculating property tax in UAA system will, therefore, be notified clearly for the information of the rate payers.
It is envisioned that the UAA system would be non-discretionary, transparent, equitable, easy to administer and empower the citizen by providing opportunities for self assessment.