TAX ON RENTED PREMISES TO GO DOWN

The Nagpur Municipal Corporation (NMC) has a New Year gift for landlords. As per the new property tax evaluation system, the tax on rented properties will go down significantly.Additional deputy municipal commissioner Ajay Ramteke told TOI on Thursday, "In layman's terms, the property tax of rented buildings will be equivalent to two months rent instead of five months rent in the earlier system."As per the new tax evaluation formula, the occupancy factor for rented buildings is two against one for properties that are being used by the owner. This means that the tax levied on a rented property will be twice than if it was occupied by the owner.Ramteke said that the NMC has already started issuing property tax demand notes to Nagpurians on the basis of the new formula. Although, this process was to be completed by March 2008 it may take some more months. Property owners will be issued reassessed demand notes as and when their assessment is complete, he said.NMC sources said that as per the earlier system the tax of a rented property was assessed arbitrarily by the clerical staff. As a result, landlords had to pay four to five months rental amount as property tax.This was the main reason for large scale corruption in the property tax department of the NMC. Most landlords chose to pay bribes to the rent collectors and show their property as unoccupied instead of paying the actual tax. Others used legal loopholes to get their tax reduced.In several cases a part of the rent was shown as maintenance towards fixtures and fittings or other such charges. Some took a part of the rent through cheque and remaining as cash. The tenants were told not to disclose the actual rent to the NMC staff, sources said.Sources said that this is a strategic move to bring the landlords into the tax net and once they start paying tax the civic body will slowly increase the same in two-three years. Real estate agent Kitty Singh was elated over the development. "Many retired persons derive their livelihood from rent. They will get immense relief," he said. Rajkumar Shinde, a contractor who has rented out three flats, said that the rationalisation of tax structure should have been done long ago. "It hurt a lot to pay four to five months rent to the NMC, whose services are not at all satisfactory." Consumer activist Adv Shreerang Bhandarkar said that while reducing the tax on rented properties was a good move the NMC should reduce it further in the coming days. "The NMC does not provide any extra facility to the tenant. Hence, there is no logic in levying extra tax on a rented property. In any case, the landlord pays income tax on the rent." – www.timesofIndia.com