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Moneylife Foundation Property Tax Burden seminar: Why the New Method is Anti-people

Mumbai’s housing societies recently received fat property tax bills with arrears for the past three years. Experts believe that there is no justification in this bill, particularly because your bill is based on the Ready Reckoner rate, which is a flawed method. Read on to find out the reasons behind the rate increase and what you should do about it.

Moneylife Foundation’s 153rd seminar, on 9 February 2013, received an enormous response, from Mumbaiites concerned about the hefty tax they’ve been asked to pay with arrears on their property. Mr Ashok Ravat, a noted civic activist and founder-convener of the Shivaji Park Advanced Locality Movement, and Advocate Godfrey Pimenta, President of Sahar Citizens Forum and ardent RTI activist, who took on the difficult task of simplifying these complicated matters for lay persons. The seminar wasn’t just a breakdown of the flaws in the method of calculation, though. Mr Ravat and Mr Pimenta discussed the reasons for the introduction of the new method, the Brihanmumbai Municipal Corporation’s (BMC’s) ‘intentional’ errors in calculating bills, and explained how to tackle the problem. The seminar was attended by more than 120 people, at least 20 of them standing and 35 unable to enter because there was not even standing room.

Mr Ashok Ravat began the seminar, wasting no time in getting to the point. He said, “The new system, the capital-value-based tax system is totally flawed. It hasn’t been accepted by any other municipal corporation, just ours. You would be right to wonder why the Ready Reckoner rate is the basis of the calculation. It is, after all, supposed to be only for stamp duty calculation.”
 

The BMC was able to get elected representatives to agree to this new method, Mr Ravat said, by agreeing not to increase the rates of those flats under 500 sq ft, to increase the rate of other residential properties by no more than twice the current rate, and of commercial properties by no more than three times the rate. He said, “However, those people whose rate has not increased right now will find a sharp increase of 40% two years hence. Those who have been served with this special notice should protest the bill, but pay it by 31 March 2013. This is because otherwise you will have to pay a penalty of 2% per month.”
 

The new system also doesn’t take into account all the details of a property. It does not consider the various planning and design aspects, quality of materials used, outgoings, or building regulations. Every property, from the slum to the luxury apartment, is being taxed at the same rate. Mr Ravat also said that it was being completely unfriendly to the property owners of Mumbai by not serving them with notices directly. He said, “If the bill is for me, why are they giving it to the society? If the secretary is inactive, you may not even know. If there’s no society formed, they are giving it to the original developer. Those affected the most may be the tenants. This is because if they are not informed and don’t pay, their flat may be evacuated after six months of non-payment.”
 

To address the more technical matters, Advocate Godfrey Pimenta then took over. He used his own bill as an example and also brought up the many other bills he has reviewed. But he began by explaining why the BMC has decided to change its property tax calculation method. He said, “There’s a simple reason for the change from the rateable value system. It has been caused by financial mismanagement of the BMC. The facilities we taxpayers receive are small, but the frauds within the corporation are large. You must have read about the fake bills of Rs70 crore by a contractor. You should also know that the Anti-Corruption Bureau has called the BMC the most corrupt body in the country. Nowhere in the world are property taxes so high.”
 

Advocate Pimenta said that the BMC is now trying to raise property tax to receive generous grants from Jawaharlal Nehru Urban National Renewal Mission. 65 corporations, including BMC, have signed up for this. Part of the mandate is to create a geographical information system to indentify property owners and to increase the number of property tax payers. Advocate Pimenta said, “The BMC, to fulfill the mandate has to bring 85% of property owners in India under the system. But it hasn’t been able to. How it is trying to compensate is by raising the tax bill of 55% of the people whose area has already been taxed. So instead of increasing the number of people, it has increased the rate. Of course, it hasn’t bothered to increase the number of people because that would mean taxing the slum-dwellers, which it doesn’t want to do.”
 

Several mistakes have been found in the property tax bills by Advocate Pimenta. He said, “What you need to do is check whether they’ve got the details right. Look at your old property tax bill and verify whether the right details are in the new bill. Your area, the floor, etc, should be correct, the age of the building should be correct. In my case, I found four mistakes. For example, my flat on the first floor was taxed at the rate meant for flats above the 100th floor. This is an ‘intentional’ mistake. The BMC knows what it is doing and hopes you won’t notice. In other bills I have noticed that the age of the building is different in different bills.”
 

Advocate Pimenta ended his talk by urging participants to protest their bills, saying that there are several organisations currently building a case against the BMC, and asked tax payers not to panic. The talk was followed by a very engaging and lengthy question and answer session, during which both speakers took the opportunity to clear the doubts of the participants.

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COMMENTS

VISHWAS S KHADE

3 years ago

what is the latest regarding bmc taxes

Bharat Gandhi

4 years ago

Sincere thanks to the Moneylife Foundation to organize the event, thanks to both speakers; Shri Ashok Raut and Adv. Mr. Godfrey Pimenta to provide in-sight realities on various problems surfaced especially the assessing authorities' dependent on Ready Reckoner's property value for stamp duty calculation adopted to issue new property tax bills. Adv. Godfrey have been kind enough to prepare running into thirty pages " Draft " of complaint, which will be mailed in due course by the Moneylife Foundation to all registered with them. once again thanks to Ms. Sucheta Dalal, Mr. Basu and entire team to remain standing continiously for three hours accommodate more than capacity of premises and proivde refreshment without charges any any free! Best wishes to the Foundation.

Nifty, Sensex headed lower: Weekly Market Report

While the market may try to bounce back, the medium-term trend is firmly down


The market closed lower this week, down for the second straight week, as the government lowered the GDP growth rate estimate for the current fiscal to 5%, compared to 6.2% growth in 2011-12. Macro-economic indicators like industrial output for December and monthly inflation data will drive the market in the week ahead.

 

The BSE Sensex closed the week with a loss of 296 points (1.50%) at 19,485 and the Nifty ended at 5,904, down 95 points (1.59%). While the market may try to bounce back, the medium-term trend is firmly down.

 

Weak global cues and selling in PSU, healthcare and power stocks caused the market to end lower on the first day of the week. The market settled in the red on Tuesday on selling pressure in heavyweights. The benchmarks ended flat on Wednesday as the market gave up its gains in the second half of the trading day.

 

The lower GDP estimate for the current fiscal pulled the market down on Thursday. Subdued quarterly earnings from corporates and selling in stocks from rate-sensitive sectors led the market lower on Friday. While the Sensex closed lower on all trading days of the week, the Nifty barely managed a green close on Wednesday (up two points).

 

BSE IT (up 2%) and BSE TECk (up 1%) were the sectoral gainers in the week while BSE Consumer Durables and BSE PSU (down 5% each) were the top losers.

 

TCS (up 6%), HDFC (up 4%), Sun Pharmaceutical Industries (up 3%), HDFC Bank and Wipro (up 1% each) were the top Sensex gainers. The key losers on the benchmark were Sterlite Industries (down 10%), Cipla (down 8%), BHEL (down 7%), ONGC and NTPC (down 6% each).

 

The Nifty was led by TCS (up 6%), HDFC, Sun Pharma (up 4% each), UltraTech Cement Company (up 3%) and HDFC Bank (up 2%). The major losers in the week were Jaiprakash Associates (down 12%), Bank of Baroda (down 11%), Cipla, Sesa Goa (down 8% each) and BHEL (down 7%).

 

The Central Statistics Organisation (CSO) on Thursday projected a fall in the country’s GDP growth to a decade low of 5% in 2012-13, a sharp decline from the 6.2% expansion witnessed in the previous fiscal. The CSO's economic growth projection is a lower than the 5.5% forecast made by the Reserve Bank of India in its quarterly monetary policy review last week.

 

Meanwhile, the finance ministry has said the CSO has underestimated GDP growth rate for current financial year and exuded the confidence that economic expansion will exceed 5.5%.

 

Among corporates, weak results and outlook impacted companies including Mahindra & Mahindra, BHEL, Hindalco Industries and Cipla.

 

In international news, the focus shifted to Europe as the European Central Bank (ECB) kept interest rates at a record low 0.75% at its policy meeting earlier this week. ECB president Mario Draghi said the central bank will monitor the economic impact of a strengthening euro, feeding expectations the currency's climb which could lead to an interest rate cut.

 

Also, Chinese exports grew 25% in January from a year ago, the strongest showing since April 2011, while imports surged 28.8% on the year.

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