Property tax is a tax directly levied on real estate. The governing body of the region which houses the property levies the property tax. This tax depends on the value of the property (which includes the land as well) and is usually determined by the local governments or municipalities.

The idea of ARV (Annual Rateable Value) procedure determines the present property taxation system. Property’s Annual Valuation (AV) is calculated after subtracting 10% on the account of maintenance and renovation from the yearly rent obtained from property. In case of a property let out per year, 10% is deducted from the annual logical rent.

The current system lays down a tax rate which grows with respect to the distinct Annual Valuation of property and it is figured out by deploying an intricate formula. It can usually vary from 11 to 40 percent. Nevertheless, the calculation of the tax rate in case of ordinary flats depends upon the progressive Annual Valuation of all the flats in the site. If a section of property is used for commercial purposes, a provision of 50% additional charge (or ‘commercial surcharge’ as we call it) is also required.

Complications

There are some drawbacks in the present system that the taxpayers need to notice:

  • Adequate chances for individuality and uncertainty in the present system are likely to give rise to arbitrariness resulting in real or apparent injustice in the assessee’s eyes.
  • Forming a fair rent for different kinds of properties becomes difficult because it happens to be subjective in character and can change from citizen to citizen.
  • A tendency remains to misinterpret the actual rent since the strategy for calculating the Annual Valuation is dependent on the rent collected.
  • The present tax system is not much supported by the citizens and that has led to imperfect agreement.
  • An assessee is found wasting time and his resources by taking legal actions to seek assistance.
  • The assessee finds no way for assessing himself and this augments the necessity to get assessing officials in the scenario.

Unit Area Assessment plan for Property Taxation

The Annual Rateable Value Method (ARV) has its own innate problems; to eliminate such problems, Indian cities have come to introduce a property taxation system based on area. The same system comes under different names; Kolkata calls it the system of Unit Area Assessment (UAA).

There are four major factors depending on which the Yearly Property Tax in Kolkata under the UA Assessment method is calculated:

  1. Rupees per square feet (the base unit area value or BUAV, category-wise)
  2. Multiplicative Factors
  3. Land area or the covered space of the building (in square feet)
  4. Tax rate (in percentage)

The payable Annual Tax (in Rupees) in Kolkata is calculated by simply multiplying all these above factors. This is the fundamental formula.

There are in total 293 blocks in the whole city and these blocks fall under seven categories- A, B, C, D, E, F, and G. The categorization is done on the premise of things like Market value, various facilities, and infrastructure and so on. The Annual Value per square feet or Basic Unit Area Value (BUAV) is allocated to each of these categories in a certain manner, i.e. the category ‘A’ will have the highest Basic Unit Area Value while the category ‘G’ will be represented by the lowest Basic Unit Area Value. In this way, the properties’ equity in the similar category blocks or same blocks is ensured on the large scale.

To the end of avoiding difficulties and complications, certain parts like slum or area which is ‘thika’ tenanted are dragged under category ‘G’, for the motive of assessment. The geographical location is not considered in this particular case. Similarly, the acknowledged RR (Refugee Relief) colonies in Kolkata which include the settlements of the Government notified Schemes like EWS (Economically Weaker Sections) and BSUP (Basic Services for Urban Poor) are put under the category ‘E’ regardless of their geographical positions.

Taking the broad diversity in the properties in a block into consideration, and to keep an account of that, Multiplicative Factors are established. These Multiplicative Factors would offer account for the variations in the property in terms of the points like location of a property within a block, its purpose of use, its age and size, kind of structure and the nature of residency, which would be notified and utilized to determine the Basic UA Values (BUAV) of the properties.

The percentage of tax rate for a flat with its maximum-minimum limit ranging from 6 to 20 percent would be reported in the Unit Area Assessment Method, but it will not rely on the property’s Annual Valuation; this particularly does not fall in line with the current taxation system in Kolkata. The tax rate for the developed slums is agreed at 8%. According to this system, the tax rate of the individual flats will not depend upon the increasing Annual Valuation of all the flats in the sites concerned.

An official Gazette containing a draft notification was published to get proposals and grievances from the citizens of Kolkata before the matters of block division were finally decided. Citizens can avail of the same facility when it comes to deciding category-wise BUAVs of the properties.

An MVC (Municipal Valuation Committee) is constituted by experts from different spheres of society to resolve matters like block divisions (based on categorization), Basic Unit Area values, Multiplicative Factors vales, tax rates and the like. An ARC (Anomaly Review Committee) was also established in Kolkata, to examine the feedback of the citizens and consider their views towards the process of such categorization. Once in five years, these categories or values are going to be revisited.

The assessee himself does the assessment of his property as opposed to the old system where certain inspectors would undertake the responsibilities for assessment.  The parameters for assessing Property Tax in the Unit Area Assessment (UAA) system would be properly notified to inform the tax payers.

The Unit Area Assessment system is envisioned to be transparent, impartial and non-discretionary. The citizens of Kolkata are most likely to be benefitted by the self-assessment opportunities.