Doing the math:The plinth area of the house, the construction material used and the location are among the factors taken into the account for calculating property tax.
Property tax is a tax based on the value of real estate and personal property.
It is one of the major revenue earners for the Kozhikode Corporation. However, many house owners are unaware how this tax is calculated.
The procedures for getting the property tax approved from the civic body runs into several stages. Initially, a revenue inspector conducts a site inspection soon after the house owner submits an application to the Corporation that his or her house has been completed.
Based on the Reasonable Letting Value (RLV), the revenue inspector assesses the value of the property. The value is determined on the basis of the Annual Rental Value (ARV) — the rental fee the building will get in a year. Several factors, such as the plinth area of the house, the construction material used and the location, are considered for ascertaining the ARV. The revenue inspector then prepares the ARV and submits it to the authorities.
The ARV is calculated both on the land and the building. But the rent on the land will be for a month and on the building for the remaining 11 months. Suppose if the rent determined is Rs.1,500 a month, the value of the rent on the land will be Rs.1,500 and value on the building, Rs.16,500 (Rs.1,500 x 11 months). Now, the total ARV will be Rs.18,000. The ARV will be higher for a commercial building.
However, the tax will be calculated in a different format.
The civic body will give a 20 per cent rebate on the ARV if the house owner occupies the house. The property tax is calculated based on the location of the house specifically on the revenue ward system. There are 39 revenue wards for the 55 electoral wards of the Kozhikode Corporation. Revenue wards from 1 to 25 are located in the town area and the remaining in the extended areas of the civic body.
To simplify, there are 27 wards in the old municipal area and the remaining 28 are those merged with the Corporation later. The property tax will be 21.25 per cent of the total value for houses located in the town area and 15 per cent of the total value on the extended areas.
If the house owner is unsatisfied with the property tax determined, he or she can take up the issue within 15 days with the Corporation secretary, who is authorised to reduce the amount by up to 10 per cent.
If the house owner is still unhappy, he or she can appeal within 30 days to the Standing Committee on Tax Appeal, which has been empowered to reduce the amount to 20 per cent of the tax earlier fixed.
One has to pay the property tax twice a year, in March and in September. Five per cent of the amount the Corporation earns from property tax will have to be given as library cess to the State Library Council.
The Corporation earns over Rs.15 crore each year from property tax. It anticipates an income of Rs.18.5 crore this fiscal. This is high compared to the other taxes the Corporation receives, such as income from rent of buildings and land, Rs.8 crore; advertisement, Rs.9.5 crore; construction activities, Rs.4.75 crore; and shop licences, Rs.1 crore.
New system
Corporation officials say the ARV is an old system adopted since 1984 to calculate the property tax, which many believe is unscientific. Last year, the State government came up with a proposal to revise the property tax structure allowing the local bodies to collect tax based on the carpet area of the building.
Currently, the new tax structure has been frozen after the Opposition raised the issue stating that the government order on the new system was unconstitutional. One of the complaints was that the government had not framed rules and notified them. Besides, builders had opposed the new tax regime.
Nearly 1,64,000 assessments, including commercial establishments, will have to be made in Kozhikode with the adoption of the new system, officials say.
The new system has been designed dividing each civic body into primary, secondary and tertiary zones, depending on the location of places such as those having government buildings, educational institutions, commercial complexes, markets, bus and railway stations and hospitals.
The Corporation has already classified these zones after undertaking a study based on the development activities in all the wards.
Thus, a single ward will have further divisions based on the urban nature and infrastructure in an area.
The proposal for an area in the primary zone is between Rs.8-20 a square metre (1 sq.m = 10.76 sq.ft) for residential buildings; Rs.16-40 for industries and Rs.32-160 for commercial buildings.
Concession rates have been proposed for secondary and tertiary zones.
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