Property owners in the city — numbering around three lakh — have been given a tax relief of Rs17 crore by the political wing of the Ahmedabad Municipal Corporation (AMC). But this is just 2% of the total tax demand estimate of Rs806 crore towards property and other direct tax for the 2014-15 fiscal.
In fact, the relief will be negligible as the standing committee has approved of the municipal commissioner’s proposal to generate an additional income of Rs86 crore by implementing new jantri rates to calculate property tax.
As the standing committee has proposed a single tenant factor for all residential properties, the owners need not pay double the property tax on rented residential property from the next financial year.
The political wing also added Rs153 crore capital expenditure and Rs247 crore revenue expenditure proposals to the commissioner’s budget of Rs4,901 crore and thus took the AMC’s budget for FY2014-15 to Rs5,301 crore.
Currently, AMC uses two types of tenant factors to calculate property tax. For the self-occupied residential property, tenant factor is 1, while for rented properties, tenant factor is 2.
As a result, the owner has to pay double the property tax on rented property. For example, if a resident occupies a new flat with 100 square metre area in the Satellite area, he has to pay Rs3,000 as property and other direct taxes. But if he rents out the same flat, he needs to pay Rs6,000 as property tax. From the next financial year, the owner will have to pay only Rs3,000 even if the property is rented out.
Out of a total of 13 lakh residential properties, around 3 lakh have been given on rent. “As we do not provide any additional facilities to the tenants or the properties given on rent, it has been decided not to recover higher taxes from them,” said Bhupendra Patel, chairman of AMC’s standing committee.
In the eastern part of the city, all the houses of a particular chawl are owned by the original owner.
So, the occupier cannot become the owner. In such cases, residents end up paying double the property tax despite the fact that they have been occupying the house for more than 30-40 years, said an official of AMC’s property tax department.
Similarly, there are many houses in the old city which fetch only negligible rent for the owner.
Owners of such properties have to pay several times more property tax compared to the rent, said the official. Real estate developers believe that the move would benefit people investing in residential properties for creating rental income. “The move will increase the net rental income of investors and make investment in residential properties more attractive,” said Yogesh Bhavsar, president of the Gujarat Institute of Housing and Estate Developers.