How to deal with the exorbitant increase in property tax in Mumbai

A new notice by Municipal Corporation of Greater Mumbai for revising property taxes have raised serious concerns for housing societies and building owners. Property owners ought to carry out their own valuations of their properties to compute the correct value per flat in order to establish the right dues by demanding a rectification backed by authentic independent professional certification

The heavy demands recently raised by the Municipal Corporation of Greater Mumbai (MCGM) have raised serious concerns for housing societies and building owners in the island city of Mumbai. Many of these concerns are indeed genuine, they need to be adequately addressed, the retrospective element being one of them has rightly been challenged in the courts.
 

Our ALM (Advanced Locality Management—a local area network of citizens) discussed at length with a cross-section of professional members—civil engineers, architects and office bearers of co-operative housing societies (CHS) in an effort to get into the mechanics of working out the extent of damage, if any, at the ground level. Each society/owner was advised to first and foremost record objections by filing them in the format furnished along with the demand.
 

In going into the genesis of this entire demand exercise, it was pointed out to the members that the civic authorities have hitherto been following the archaic mode of assessing property tax based on rateable value—the assumed value at which the property was expected to fetch when rented out. Now with this revision the actual carpet and built areas are sought to be taxed based on rates applicable as on 1 April 2010—the civic authorities seeking to align the property value to the prevailing going rate in the locality.
 

These days it is noticed that even a 1 BHK flat owner in this island city is sitting on an asset worth over Rs1 crore, s/he is virtually a crorepati, sure to collect a windfall over the few thousands that was initially invested years back. The MCGM now seeks to collect its share of flesh in this appreciation by levying the tax based on perceived gains of the flat owners.
 

Admittedly there are errors in the inputs provided, essentially in the basic each flat area from which the entire exercise ought to commence. The usages mentioned may need rectification too.
 

The ALM felt that the housing society on its own first gets EACH and EVERY flat meticously measured from wall-to-wall to ascertain the actual carpet area. For once, the CHS will be able to ascertain the exact square area of each flat, as in most cases, the areas mentioned are the old/initial original areas taken from the original MCGM building approvals.
 

It is noticed, in many cases members have subsequently not obtained either the mandatory society and/or municipal approvals for extending/covering balconies/galleries or for breaking down internal walls, all these resulting into increasing the basic sanctioned floor area. Some have been putting residential areas to commercial use. Most of these aberrations that are not even within the knowledge and consent of the society can now be rectified as a result of this exercise. 
 

This, once-in-a-lifetime correction of the actual areas of all the flats, can, in the ultimate analysis, result is a win-win situation for both the members and their societies. Further, another distinct advantage is that in the event of the building/society going in for redevelopment at a later date, this upward revision will go a long way in getting larger flats for each member.
 

Our ALM advised member-societies to appoint an independent third party professional—a civil engineer or architect of their choice—to carry out this exercise of ascertaining the present flat areas, usage and also to compute the correct value per flat in order to establish the right dues by demanding a rectification backed by authentic independent professional certification.  This may be of assistance in filing the objections; it has been left to the respective managing committees of the CHS to take the call on the modus operandi of the filing.  This, it must be pointed out, is purely an in-house voluntary exercise to be carried out by each CHS, that has nothing to do with its pursuing  other legal avenues like challenging the validity of the demands, etc.
 

Moneylife Foundation has organised a seminar on the issue on 9th February. It would be addressed by well-known activists, Advocate Godfrey Pimenta and Ashok Ravat.
 

“Property Owners’ Association” is contemplating to approach the high court and has organised a joint meeting at Yashwantrao Chavan Auditorium (near Mantralaya) on 7th February at 6pm. Their contact numbers are 23853436/ 23841385. If you think the rise is unfair, attached is a sample complaint letter to be submitted to MCGM immediately and forward the message to as many people if possible.
 

Here is a sample complaint letter…

 

Complaint under Section 163(1) & (2) of the

Mumbai Municipal Corporation Act, 1888

 

                                                                                                                                Date: ________

 

Name of Complainant                     :

Address:

House No.                                            :

Name of the Building                      :

Name of the Street                           :

Locality                                                :

Landmark                                            :

Pin Code                                                :

Mobile / Telephone No.                     :

Email ID                                                :

 

To

The Assistant Assessor and Collector,

-------- Ward,

Mumbai.

 

Sir / Madam,

 

I am in receipt of the special notice bearing No. ------ dated ------- on -------- for property bearing Account No. ------------. By the said special notice under reference, you have purportedly fixed capital value of the said property at Rs.-------- as shown in Annexure A enclosed to the said special notice.
 

I am making this complaint under Section 163 (1) and (2) of the Mumbai Municipal Corporation Act, 1888 (“the said Act”), to register my objections to the purported fixation of capital value. I say that nothing stated therein shall be deemed to have been admitted by me unless specifically done so herein. Further, the contentions raised in the present complaint are without prejudice to my rights and contentions that the system of levy of property tax on the basis of capital value is itself illegal, void and without authority of law.

 

By this complaint, I hereby object to the fixation of capital value and levy of property tax on capital value basis. The levy of property tax on capital value basis itself creates an inequitable distribution of tax and gives unguided powers and authority to the Corporation to levy tax on capital value at future date without referring to changes in the levy of taxes to the elected representatives of the Municipal Corporation.

 

I further bring to your notice that calculating capital value based on the stamp duty ready reckoner is an incorrect method as the ready reckoner prepared by the government is only for the purpose of determining the market value of the property. Further, it is a settled position in law that the ready reckoner is only a guide for determining the market value of the property and cannot be considered binding or a basis to determine/ascertain the capital value of a property.

 

You may also note that your special notice, bill and Annexure A thereto have been wrongly served upon the societies and the landlords. You are required to serve the said documents to the tenants and/or occupants who are in actual occupation and possession of the property. Without giving notice to the individual tenants and occupants, the Corporation has violated the principles of natural justice of the tenants and occupants as they have not been given an opportunity to object to the ascertainment and levy of property tax based on capital value.

 

Without prejudice to my rights and remedies to challenge the said determination of capital value and levy of property tax based on capital value, I am filing the correct details and information in Annexure A of your notice.

 

I am also enclosing herewith the following documents in support of my complaint.

(i)

(ii)

(iii)

(iv)

(v)

 

Yours Truly,

 

(Complainant)

 

(Nagesh Kini is a Mumbai-based Chartered Accountant turned activist.)

Comments
VS Rao
9 years ago
MCGB started issuing demand notice for additional property tax in the last couple of years to the housing societies for the flats which have been let out. That too it is being done on selected Housing Societties only which have furnished such details. This is unfair as the demands are not uniformly applied on all buildings and societies are responsible for such taxes. Please advice.
Vishrut Patel
Replied to VS Rao comment 8 years ago
Dear VS Rao,

Thanks for posting your comment.

As you may be aware Moneylife Foundation has launched a Legal Resource Centre ( http://lrc.moneylife.in/ ) to provide advice and help in such matters.

We request you to send your query through the LRC by clicking in this link http://moneylife.in/lrc.html

Best Regards,
Vishrut Patel
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