Explainer: How is your revised property tax calculated in Chennai?


GCC revises property tax for residents of Chennai after virtually twenty years. Picture: El Vivian Richard / Wikimedia Commons

The Tamil Nadu authorities earlier this April elevated the property tax for all native our bodies within the state. Which means residents of core areas of Chennai should pay at the very least 50% greater than they’ve been paying for greater than twenty years.

The Better Chennai Company has 13 lakh property tax assessees with an annual demand of Rs 800 crore. The modification, which got here into impact from April 1, 2022, goals to reinforce the income producing capability of the civic physique, which performs a significant function in offering higher providers and bettering infrastructure.

Right here is how the property tax is calculated primarily based on the amendments made.

property tax modification

Chennai noticed a common revision of the property tax in 1998. Further areas (annexed to the GCC in 2011) and surrounding municipalities noticed a revision in 2008. A authorities order was issued in 2013 for wealth tax revision. Nevertheless, it was placed on maintain in 2019 as a consequence of numerous causes. Later, a committee constituted to supply suggestions for common revision checked out market charges, inflation, gross state home product (GSDP) and price inflation charges.

It was discovered that the Wholesale Worth Index had elevated by 2.98 instances from 1998 to 2022. Whilst different growth parameters elevated, property tax charges remained the identical. Expenditure for municipal our bodies additionally elevated, whereas for native our bodies the income has historically been restricted and closely depending on taxes. This has strained municipal funds, forcing the federal government to revise property tax charges after greater than twenty years.

As per the revised property tax in Chennai, there might be a 50% enhance in tax on residential properties lower than 600 sq ft in previous metropolis areas and 25% in extra areas. For residential properties starting from 601 to 1,200 sq ft, there might be a rise of 75% in previous metropolis areas and 50% in extra areas. Residential properties and industrial buildings of 1,201 to 1,800 sq. toes pays 100% extra in previous metropolis areas and 75% extra in extra areas. Housing bigger than 1,801 sq. toes pays 150% extra within the previous metropolis and 100% extra in extra areas.

Non-residential buildings, hospitals, marriage halls, theaters and lodges pays 150% extra within the previous metropolis and 100% extra in extra areas. Instructional establishments pays 100% extra within the previous metropolis and 75% extra in extra areas.

Nevertheless, since April, the GCC has acquired over 3,000 complaints from residents of Chennai in opposition to the property tax modification.


Learn extra: A Information to Understanding the Income and Expenditure of Chennai Company


Why is it vital to extend taxes?

Property tax is crucial and secure supply of self-generated income for the native our bodies. That is vital for the steadiness of the native our bodies, assembly the expenditure incurred and offering higher service to the general public. “The property tax in Chennai and throughout the state has not been revised for many years. Even when the erstwhile authorities tried to revise the property tax earlier, they had been compelled to roll again as residents had been in opposition to the hike,” stated KR Shanmugam, director, Madras College of Economics, who Welcome the tax hike.

With the central authorities making wealth tax modification necessary for state governments to obtain grants, the state is now left with no different choice however to revise the tax. The tax modification was additionally a part of the suggestions made within the experiences of the State Finance Fee and the fifteenth Central Finance Fee (CFC).

“If the federal government had hiked the property tax marginally yearly, residents wouldn’t have realized such a pointy hike not too long ago. Even after the modification, Chennai has decrease tax charges than different main municipal firms,” Shanmugam stated, citing a examine performed by the Indian Council for Analysis on Worldwide Financial Relations (ICRIER) for the fifteenth CFC examine. It additionally revealed that the per capita property tax assortment was the bottom among the many six largest municipal firms within the nation.

Comparison with other municipal corporations
Chennai had the bottom per capita property tax income in 2017-18 as in comparison with different main municipal firms in India.
Pic: A examine performed by the Indian Council for Analysis on Worldwide Financial Relations (ICRIER) for the fifteenth Central Finance Fee (CFC)

The tax hike will even assist in decreasing the dependence of native our bodies on state transfers. The ICRIER report learn, “Municipal firms might be depending on state transfers till their very own income place improves considerably or the central authorities takes huge steps.”

One more impact of not amending the property tax is the shortcoming to borrow from market sources. Municipal firms want the permission of the state authorities to borrow from market sources. Their deteriorating revenues adversely have an effect on their creditworthiness making it tough for them to borrow from market sources.

At current, property tax is the foremost income for Chennai. “Whereas metropolis governments ought to get a share in all income prices, together with GST and revenue tax, a grant from the middle or state could possibly be a reform-based incentive grant for metropolis governments,” stated Meghna Indurkar, program supervisor of Remodeling City Governance, Praja Basis.

Chennai Municipal Finance Status
Better Chennai Company’s present monetary place. Picture: Meghna Indurkar, Praja Basis

Revision of property tax charges ought to be finished strictly on occasion. The town authorities might grant exemptions as an alternative of exemptions to a sure part of the society or on sure events (equivalent to epidemics or floods, and so forth.). “It will assist in guaranteeing 100% protection and can create a foundation for elevating the property tax and in flip Chennai could have its personal income. When all residents register as property tax payers, they not solely develop into customers however may also demand accountability from the service supply company,” stated Meghna.

Wealth Tax Revenue of Greater Chennai Corporation
Wealth tax income of Better Chennai Company. Picture: Meghna Indurkar, Praja Basis

Revised Tax Calculation Points

Following complaints acquired by a number of residents, income officers are holding a gathering with residents who had filed a illustration in opposition to the property tax hike in Chennai. Jaishankar B, a resident of Valmiki Nagar, who attended one such assembly, stated he was not in opposition to such a tax hike.

“We perceive that property tax has an enormous function to play within the funds of the municipal company and welcome this transfer as nicely. Nevertheless, we’re solely involved about exponential progress. I’m paying an quantity of Rs 3,280 as property tax semi-annually. As per the latest discover of GCC, I’ll now must pay Rs 8,200 as half-yearly property tax,” he stated.

Through the assembly, officers had clarified that there can be no additional discount in property tax and defined the rationale behind the rise to the residents. “Whereas I perceive the consideration for potential discount in sure areas equivalent to a registered manufacturing facility, instructional establishments or industrial property, the officers talked about that there will even be particular issues for residential institutions transformed into hostels. Officers stated that for those who had transformed a giant home right into a hostel earlier than the outbreak of COVID and nobody occupied it because of the pandemic and if the home stays vacant, then some leisure could be given to it. It regarded fairly uncommon,” Jaishankar stated.


Learn extra: Why does actor Rajinikanth pay much less tax than Nagarajan of Nanganallur?


The principle argument of residents of suburban areas was that the charges for primary roads (BSR – an element within the calculation of property tax) had been greater in extra wards than in core areas. V Rama Rao, a civic activist from Alandur, stated the BSR in areas like Alandur (former municipality) is Rs 2.50, whereas in core areas like T Nagar or Nungambakkam it ranges from Rs 0.90 to Rs 1.50.

In a gazette notification issued by the federal government on April 11, 2022, it has been stated that the present primary avenue charges will even be used within the revised property tax. “Whereas they need to have lowered the BSR for the hooked up wards first after which revised the tax, they’ve lowered the multiplying components by 0.25 instances just for the extra wards. This isn’t honest,” stated V Rama Rao.

In response to complaints on BSR, the company council adopted a decision in Might to make BSR equal to or lower than core areas in some expanded areas. Nevertheless, there isn’t any rationalization of the calculation process or the revised BSR within the discover issued to the property house owners.

In one other case, Rama Rao noticed {that a} change in property possession resulted in a rise in tax. “For instance, if an house has 12 residential items, equivalent to for 800 sq. toes, the property tax was the identical for all items. Nevertheless, if the possession of 1 residential unit modified from one particular person to a different The revised property tax for that was at the very least Rs 1,000 greater than all different residential items. That is finished within the title of revaluation,” he stated, including that the federal government ought to give correct rationalization in such circumstances.

How is property tax calculated?

As per the calculation particulars furnished by GCC on its web site, the web half-yearly wealth tax payable is 12.4% of the Revised Annual Worth (AV) of the property.

revision of tax
Tamil Nadu Gazette Notification on Revised Wealth Tax was issued on April 11, 2022. Picture: Authorities of Tamil Nadu

The essential system used within the revision of AV is the pre-revision AV multiplied by the expansion issue (given within the chart above). Age leisure is deducted from the multiplied worth.

Revised AV = Pre-revision Annual Worth of Property (AV) (X) Development Issue (-) Age Leisure

Right here is an instance of a calculation assertion introduced for a resident of a significant metropolis space:

For a given property, the pre-modification annual worth (AV) of the property is Rs 5,242 and the expansion issue for residential buildings (600 to 1,200 sq ft) is 1.75.

Revised AV (earlier than age leisure) = Rs 5,242 (x) 1.75 = Rs 9,173

For the given asset, the share of low cost on AV is 9. (The calculation of charges and age leisure is proven by means of one other instance in a picture under)

Age leisure = 9,173 x 9% = Rs 826

Revised AV (after age leisure) = Rs 9,173 (-) Rs 826 = Rs 8,348

Therefore, internet half-yearly wealth tax payable (12.4% of Revised AV) = Rs.1,035 (rounded off to Rs.1,040)

Revised Wealth Tax Calculation
An instance of a revised property tax calculation assertion introduced by GCC
Revised Wealth Tax Calculation
An instance of an age leisure calculation for the Revised Wealth Tax Calculation.

Grievance Redressal on Property Tax Hike

An official of GCC’s income division stated that whereas real complaints are being thought-about and regarded into, regular complaints on escalation won’t be entertained. The calculation course of has been shared by means of the private accounts of the respective property house owners.

For additional clarifications, residents can contact the respective zonal places of work. Helpline quantity 1913 can also be obtainable for residents to name. They will additionally lodge a grievance on the Citizen Portal inside 15 days from the date of receipt of the discover.

This transfer has additionally been challenged legally. A petition filed by Ok Balasubramaniam of Teynampet had sought quashing of the Wealth Tax Basic Modification Discover for 2022-23 issued by the GCC on June 28, holding that it was underneath Part 100 of the Chennai Metropolis Municipal Company Act, 1919. was in opposition to.

On 27 July, the Madras Excessive Courtroom granted an interim keep on the rise in wealth tax by the GCC and directed the native physique to file a counter explaining how the revised tax quantity was labored out.

Additional listening to and remaining determination on the matter is awaited.

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