GUIDE LINES FOR VALUATION OF IMMOVABLE PROPERTIES

VALUATION CELL
INCOME TAX DEPARTMENT
MINISTRY OF FINANCE
GOVERNMENT OF INDIA
2009



AGOVT OF WEST BENGAL

Unit Area Method of Assessment
 WEST BENGAL
Property Tax is one of the main sources of internal revenue of the Urban Local Bodies. As the property tax is determined on the basis of annual valuation of lands and buildings, the entire process of determining property tax is solely dependent on assessment of lands and buildings.

PRESENT SYSTEM OF ASSESSMENT OF LAND AND BUILDINGS:
Presently in the Urban Local Bodies of this State the following two systems of assessment of lands and buildings are followed:

  1. Annual Rental Value (ARV) System: In this system tax is calculated on annual rent that is actually or reasonably be fetched by a property. Here Annual Rent (AR) = Monthly actual or reasonable rent X 12. In this system Annual Value (AV) = AR minus x% (in case of Kolkata Municipal Corporation value of this x is 10%) statutory deduction for maintenance. A percentage of AV is determined as the annual Property Tax. In case of Kolkata Municipal Corporation this tax = (AV /600 + 10)% of the AV subject to minimum of 11% and a maximum of 40%.
  2. Capital Value Method: In this system tax is calculated on Annual Value derived from cost of construction added to cost/ market value of the land. Here AV = (Construction cost + Market value or cost of the land) X a percent as laid down in the statute minus statutory deduction. Annual Tax = AV X a percentage of AV. In Kolkata Municipal Corporation AV of vacant land is determined at 7% of the market value of the land.

FLAWS IN THE EXISTING SYSTEM OF VALUATION:

Since enactment of the Calcutta Municipal Act, 1923 these two systems are being followed for assessment of lands and buildings in the municipal areas. With growing rate of urbanization and change in the socio-economic scenario the flaws in these two systems are being surfaced, and due to these flaws the system of assessment of lands and buildings is getting more complex and as a fall out the rate of collection of Property Tax is dwindling and simultaneously the scope of tax management is growing. These flaws are as follows:

Flaws in Annual Rental Value (ARV) System:

  • Subjectivity: “Reasonable Rent” is a completely subjective term, and creates considerable scope for using discretion at even lower level.
  • Discrepancy: This system creates wide spread discrepancy by placing similar properties in dissimilar tax pattern.
  • Non transparency: Non transparency of this system leads to mutual mistrust and misunderstanding. Apart from this the system creates ample scope of tax management and entry of middleman in the system.
  • Wastage of time of officials: Officials remain busier in arguing with the tax payers, cumbersome and lengthy hearing process and file / document management, than to do the duty related to tax administration.
  • Non reflection of actual revenue potential: Subletting, subdivision and collusive rent have been hiding the actual revenue potential. Apart from long term tenancy and Rent Control properties lead to low valuation for low rent.

Flaws in Capital Value (CV) System:

  • Limited availability of sales data and unregistered instruments.
  • Under reporting of Transaction Price especially for old buildings.
  • Freezing of Tax base.
  • Need for qualified staff to assess cost.
  • Uncertainty of what assets should be covered.
  • Scope for subjectivity and discretion and hence non transparency.
  • Inequity between similarly placed properties assessed at different points of time.
    Subjective element of these systems leads to non-transparency, wastage of time of the civic personnel in cumbersome processes, and above all difference of opinion leading to excessive litigations, and thus wastage of efforts of civic personnel and fund in fighting the court cases.
    In this situation to ensure a dynamic process of a transparent tax administration a decision has been taken to switch over the system of valuation of properties in Urban Local Bodies to Unit Area System of assessment.

Design of Unit Area System:

  • One time in-house work in every five years to bring equality at macro level at first.
  • Determination of valuation by an independent Committee namely the Municipal Valuation Committee.
  • Division of all wards in varying number of sub-wards/ blocks depending on basic infrastructure, in broad based manner, after considering the views of general citizens.
  • Categorization of such sub-wards/ blocks on the basis of available infrastructures and defined factors.
  • Grouping the sub-wards/ blocks of identical and similar in nature of whole area of the Urban Local Body in same set.
  • Putting Base Unit Area Value, i.e. Base annual value per sq. ft. to properties within a grade of sub ward/block with the help of revenue simulation taking into consideration the existing revenue base. In this way similarly located all properties will have similar Base Unit Area Value. This will be publicly communicated.
  • Fixing predefined and publicly proclaimed multiplicative factors (from 0.5 to 8) to determine the actual value of the property, by increasing or decreasing the Base Unit Area Value depending of condition of individual property. For fixing multiplicative factors the mandatory parameters of type of location, use, age structure and occupancy status shall bed considered, and apart from this there exist provision for considering such other parameters as may be considered necessary by the Municipal Valuation Committee.
  • Publication of the scheme, after considering the views of general citizens, for the purpose of specifying Base Unit Area values of lands and buildings under all classes of areas within the Corporation.
  • In this system the annual value of a land or building shall be the amount arrived by multiplying the total area of land and/ or building by the Base Unit Area value of such land and/ or building.
  • A percentage of such annual value shall be fixed as the annual Property Tax.
Assessment of Premises
Assessment of Property Tax in Kolkata :

Unit Area Assessment (UAA) System for determination of property tax is commenced, at present, for the Ward Number 001 to 141, with the final publication of Scheme in Official Gazette on 1st April, 2017. From 1st quarter of 2017, all properties within such wards have come under the new system and are required to be reassessed as per provisions of UAA System. However, if there is any assessment pending for the previous effective quarters with respect to any property, such assessment may be completed under the Annual Rateable Value (ARV) method of assessment that was prevalent prior to final publication of Scheme. A brief idea of two different systems for determination of property tax is as follows:-

(A) Annual Rateable Value (ARV) method of assessment of Property Tax : 

• Determination Of Annual Valuation(AV) :

a) If the property is used by the owner himself, “Reasonable Rental Method” is applied, i.e. from our database and comparing with similar premises, expected reasonable rent per month, which the property is capable of fetching, is determined. Then it is multiplied by 12 to arrive at Annual Rental Value and a 10% statutory allowance for maintenance is subtracted to arrive at the Annual Valuation (rounded off to nearest ten rupees)

b)If the property is tenanted, the actual monthly rent (including service charges and / or maintenance charges, if any) is multiplied by 12 less 10% statutory allowance to arrive at the Annual Valuation.

c) In case of Theatre/Cinema halls 7.5% of the Gross Annual receipts (excluding taxes) is fixed as Annual Value for the Hall.

d) In case of vacant unconstructed land, the Annual Value w.e.f 3rd August 2008 – 2009 will be 2.5% and 7% of estimated market value for land measuring upto and above 5 cottah respectively. For effective assessment period before March 2008-09, the rate is 7% for all cases irrespective of the land area.

• Rates of Taxes :

a) If the Annual Valuation as fixed above, does not exceed Rs.600/-, the rate of tax is 11% of the Annual Value i.e. if A.V. is Rs.500/- the property tax per year will be Rs.55/- plus Howrah bridge tax . To get quarterly gross amount of the property tax, annual property tax, is divided by 4 and rounded off to the nearest rupee. Rebate @ 5% on the quarterly tax is allowed if deposited within specified date. Net amount of property tax after rebate will also be rounded off to the nearest rupee.

b) If the Annual Valuation as fixed above, exceeds Rs.600/- but does not exceed Rs.18000/, annual tax rate is the percentage of the A.V., worked out by dividing the A.V. of the premises by 600 and adding 10 to the quotient, the sum thus worked out being rounded off to the nearest first place of decimal. Say, if A.V. of premises is Rs.1300/-; such quotient will be 1300/600=2.16% and property tax rate will be 2.16+10=12.2% (rounded off). So gross tax of such property per year will be Rs.158.60/- plus Howrah Bridge tax @ 0.5% or 0.25%, as the case may be, of AV. To get quarterly gross amount of tax this should be divided by 4 and rounded off to the nearest rupee. A rebate of 5% or the quarterly tax is allowed if deposited within specified date. Net amount of property tax after rebate will also be rounded off to the nearest rupee.

c) If the Annual Valuation as fixed above exceeds Rs.18000/-, the rate of tax is 40% of the Annual Value. That is if A.V. is Rs.20000/- the property tax per year is Rs.8000/- plus Howrah Bridge tax @ 0.5% or 0.25%, as the case may be, of A.V. and a further rebate of 5% of the quarterly tax is allowed, if deposited within specified date.

d) Howrah Bridge Tax percentage is 0.5% (for Ward No.1-65, 68-88, 90), 0.25% (for Ward No.66,67,89,91-100, 115-141), 0% (for Ward No.101-114).

e) In case of general flats / apportioned units, tax rate percentage is calculated on a cumulative Annual Value of all the flats within that premises and should be applied on individual Annual Value for respective flats to get the amount of gross property tax.

f) For Bustee and some statutory organizations, the rate of property tax is different. For Bustee the maximum tax rate is 18% on Annual Value.

g) For commercial/non-residential property, normally a surcharge @ not exceeding 50% of property tax is applicable to such property or portion of such property under non residential or commercial use and is levied additionally.
h) No property tax is payable if AV does not exceed Rs.300 (three hundred).

• Hearing on Proposed Annual Value :

There is no system of Self-Assessment in this method and generally Kolkata Municipal Corporation, on proposing any Annual Value gives hearing to the tax-payers and finally determine the Annual Value and property tax after hearing process is over.

(B) Unit Area Assessment (UAA) System of determination of Property Tax :
•  As a first step to implement Unit Area Assessment System Ward No.001 to 141 have been subdivided into 293 blocks and categorized under seven categories from ‘A’ to ‘G’. Final Notification on Blocks and Categories defining boundaries of such blocks has already been published in Official Gazette.

•  Corporation has also published the ‘Scheme’ for UAA System in Official Gazette on 1st April, 2017 that comprises the following :

1. Base Unit Area Value i.e. Annual Value per sq.ft. of covered space of building or land comprising building or any vacant land of    respective categories.
2. Multiplicative Factors, which are property specific.
3. Rate of property Tax
4. Taxable vacant land when there is a construction
5. Manner relating to submission of Self Assessment Form

•  Also, on 1st April, 2017, Final Notifications on following Rules & Regulations have been published in Official Gazette :

1. The Kolkata Municipal Corporation (Self-Assessment System, Manner and Forms) Rules, 2017.
2. The Kolkata Municipal Corporation (Covered Space) Regulations, 2017.
3. The Kolkata Municipal Corporation (Unit Area Assessment – Tax Capping) Regulations,2017.

For having a basic idea on the new system, please refer to page Brief Account of Unit Area Assessment System.

For further detail please refer to
Final Notification on Blocks & Categories,
Scheme for Unit Area Assessment System &
Relevant Rules & Regulations with regard UAA system as referred above.

• Self-Assessment of Property Tax :

As per provision of the Scheme and relevant Rules and Regulations as well as provisions of the Kolkata Municipal Corporation Act, 1980 (as amended time to time), the owner or lessee or sublessee or person liable to pay property tax of a property is required to submit Return in duly filled in Self-Assessment Form (SAF) within sixty days from date of publication of Scheme. Forms are available from website or helpdesks of different offices of Assessment-Collection departments common collection centres & e-Kolkata citizens service Centres. Forms can be submitted offline at such offices and demand under UAA will be generated after entry of data given in the form. There is also provision of online submission of SAF and payment in online mode.
The forms so submitted will be checked later randomly and property tax will be calculated by the Kolkata Municipal Corporation by its own mechanism. In case forms are not submitted in time, KMC will assess the property suo-motu. In both the cases, before final determination of Annual Value and Property Tax by the Municipal Commissioner or his representative, a one month notice will be served to the tax-payer allowing him to give objection, if any. In case there is any objection, submitted within stipulated period, notice for Hearing will be issued and the tax will be determined after hearing process is over.
It will be pertinent to note here that Annual Valuation (AV) of different portions of a property having single assessee no. with different types of age or occupancy or structure or usages are to be assessed separately for respective portions in the relevant format mentioning them in different rows. Thereafter, on the total Annual valuation the payable tax is to be calculated as per relevant tax rate. Annual Valuation of Car parking space (if any) is also to be assessed separately as per relevant MF and added to the total Annual Value for calculation of payable tax.
In case of a property/flat/unit/apartment in a multiple flat building with different flat owners, proportionate common area for individual flat is to be calculated and assessed separately as per relevant MF and added to the Annual Value of the flat(s)/units(s)/apartment(s) for deriving the total annual Value for calculating payable tax as per relevant tax rate.

• Please note that for location MF road width is the criterion. Road width includes footpath and carriageway. 

• Continuance of making payment of existing property tax under the old (ARV) System: So long the property tax under UAA system is not finally determined and paid, the tax-payers are required to make payment of property tax so determined under the old (ARV) system. Property Tax Bill under ARV System for the year 2017-18 is already raised and tax-payers are requested to make payment of such tax. If demand against all four quarters are paid at a time within rebate period of first quarter, additional 5% rebate will be allowed for 2nd, 3rd & 4th quarters, in addition to normal rebate of 5%.
If there is any difference in property tax under new system compared to the existing demand under ARV system, so paid for the year 2017-18 or so; the same will be duly adjusted or taken care of at the time of raising demand under new system.

• How to learn outstanding dues in respect of Property Tax:
Please procure an LOI from Computer Section of respective units of Assessment Collection Department and get it verified from the concerned division/ unit and if the LOI is found correct that is your O/S. [see sample]

• Functions of Municipal Assessment Tribunal : 
Each assessee is given liberty to appear before a Hearing Officer if there is any objection against the valuation proposed by KMC (Section 184(3), 184(4), 185, 186 and 187 of KMC Act, 1980 may be referred). Hearing Officer determines such objections and fixes the Annual Valuation in respect of the premises of the assessee as per provisions under section 188 of KMC Act, 1980. The assessee is also given a further chance to appeal against such valuation as determined under section 188 if he prefers to. He can appeal before Municipal Assessment Tribunal (under section 189) consisting of a Chairman and a number of other members. However no appeal will be entertained by the said tribunal if the disputed tax is not deposited. Provisions of Limitation Act, 1963 is applicable relating to such appeal before tribunal. Valuation as determined by the Tribunal is final and no proceeding shall lie in any Civil Court against the valuation as determined by the Tribunal.

• Information sheet for recovery of Property Tax through other penal measures:
Sections 217-221B, 223, 225 and Section 275 -(1)(aa) of Calcutta Municipal Act, 1980 deals the situation as mentioned above.
a) Provision for interest and penalty for non-payment of property tax (Section 217)
b) Issuance of Warrant of Distress and sale of movable property (Sections 220-221)
c) Attachment and sale of immovable property (Section 221A and sale of property distrained or attached (Section 221 B)
d) Recovery under Bengal Act III, 1913 (Section 223)
e) Attachment of rent of the tenant(s) [Section 225]
f) Disconnection of water supply line (Section 275 –(1) (aa))