Property Tax Collection In Tamil Nadu's Chennai Rises By Rs 293 Crore, Know How It Happened

Chennai made headlines for all the good reasons as the city has made a record of collecting ₹293 crores in property tax for this half year, 2022. In total, the municipal corporation collected ₹696 crores in property taxes.

The total revenue was ₹403 crore in the second half of last year, 2021. Compared to the previous year, the amount of tax collected during this time increased from rupees nine crores to ₹246 crores.

How Did This Happen?

Starting on April 1, the property tax revision went into force. As per the revision, the tax on residential properties less than 600 square feet will rise by 50 per cent in the old city areas and 25 per cent in the added areas. The increase will be 75 per cent in old city areas and 50 per cent in regions added for residential properties between 601 and 1,200 square feet.

Industrial buildings and residential properties between 1,201 and 1,800 square feet will fetch 100 per cent more in old city areas and 75 per cent more in newer areas. Larger homes cost 150 per cent more in the old city and 100 per cent more in the additional areas.

How Is The Chennai Property Tax Calculated?

According to Greater Chennai Corporation's (GCC) website's computation information, the net half-yearly property tax due is 12.4 per cent of the property's revised Annual Value (AV). The basic formula used in the revision of annual value is pre-revision AV multiplied by the increase factor, as explained below in the table. The multiplier value is then subtracted from the age rebate.

The city corporation went to greater strides to educate the public regarding the property tax. They made sure to include options for digital payment and QR codes and also set up special counters to clarify property tax-related queries and doubts. The GCC also took the initiative to provide cashback offers and gift vouchers for timely taxpayers by integrating with banks.

All this groundwork has paid off in a greater way. The forecast for the property tax revenue for 2022–2023 was at ₹800 crores, and authorities anticipated the figures to be around ₹500–600 crore in the updated estimates.

According to information from the corporation, over ₹6.90 lakh property owners have already paid the tax, while ₹6.25 lakh property owners have not. About 10,000 of the 12,300 petitions lodged against the corporation's set property taxes have been adjudicated.

How Will This Tax Revision Help?

The most significant and reliable source of self-generated income for local governments is the property tax. This will help the local governments to remain viable, cover incurred costs, and give the general public a better service in general.

Increased taxes would lessen local governments' reliance on state transfers. Another effect is the inability to borrow from the market due to the property tax not being changed. Municipal corporations must obtain the state government's approval before lending from commercial banks. Their declining revenues negatively impact their creditworthiness, making it challenging for them to borrow money from market sources.

Are Chennai People Happy With This Move?

Not really; Chennai residents have filed over 3,000 complaints with the GCC opposing the property tax revisions since April. The revenue officials have been meeting with the residents who submitted a representation against the property tax increase in the city. The officials explained to the residents the reasons for the increase during the meeting and made it clear that there would be no further reductions in property taxes.

Apart from this, the action has been legally contested. The property tax general revision notice for 2022–23 issued by GCC on June 28 was the subject of a petition filed by K Balasubramaniam of Teynampet, who claimed that it violated Section 100 of the Chennai City Municipal Corporation Act, 1919.

On July 27, the Madras High Court issued a temporary halt to the GCC's increase in property taxes and ordered the local government to submit a counter detailing how the revised tax amount was calculated.

Delay In Tax Payment & Penalties

Suppose the Chennai property tax is not paid on time, i.e. on or before September 31 and March 31. In that case, the corporation penalises defaulters at a rate of 2 per cent, and it is automatically charged with the assessed value, following a grace period of 15 days. A no-dues Chennai property tax is necessary if you want to change the property's name or anything related.

• Exemption from paying real estate taxes.
• Buildings occupied by foreign missions.
• Properties owned by the central government are exempt from the tax.

Concessions On Paying Real Estate Taxes

According to the Tamil Nadu government, the civic body's expenses have increased, combined with the low local bodies' source of revenue. This put the municipal finances under pressure. Thus, the organisation was forced to decide to raise property tax rates.

• About 20 per cent off the monthly reasonable letting value (RLV) for semi-permanent structures.
  
• Owner-occupied residential buildings are eligible for a 25 per cent monthly RLV rebate, while owner-occupied commercial buildings are eligible for a 10 per cent rebate.
• Additionally, buildings older than four years receive an annual 1 per cent depreciation allowance (up to a maximum 25 per cent rebate).

The last amendment in property taxes was made in 1988. If you have any more queries regarding the same, feel free to talk to Vakilsearch's tax experts, who will help resolve your questions and help you pay the taxes on time.

Also Read: New Labour Codes Ensure Benefits To Employees In Terms Of Pay, Leaves & More: All You Need To Know