No Tax on flats smaller than 500 Sq ft Latest News

With poll dates set to be announced anytime soon, the Maharashtra cabinet, within three days of its Tuesday meeting, gathered again on Friday to clear populist proposals like a property tax waiver for a category of homes, concessions in premiums for promoting self-redevelopment and granting 15 acres to Bharat Petroleum for a training centre in Nagpur. The property tax waiver is for 17 lakh tenements of less than 500 sq ft carpet area, which will result in an annual revenue loss of around Rs 400 crore for the BMC. The waiver was a civic election promise made by the Shiv Sena in 2017.

As for self-redevelopment, a press release said permissions will be granted within six months through the one-window system. The government has said it will provide concessions in premium for additional FSI, and transfer of development rights, besides concessions in premium for conversion from urban land ceiling to non-ULC, GST, stamp duty, a premium for open space deficiency. A committee of bureaucrats has been set up to determine the extent of concessions.

In a major pre-poll incentive, the Maharashtra cabinet has approved a property tax waiver for houses in Mumbai with a carpet area of up to 500 sq ft. The waiver will be applied retroactively from January 1, 2019, onwards and is expected to hit the BMC’s revenue by around Rs 400 crore per year. The proposal was the Shiv Sena's poll promise before the civic elections in 2017. The BMC had cleared the proposal to give the waiver in July 2017 and it was sent to the state for clearance. But the state government did not take up the proposal till Friday, when the last cabinet meeting was held, before the announcement of the code of conduct for the general election.

There was a separate proposal to extend relief in property tax of up to 60% for flats that are of carpet area between 500 sq ft and 700 sq ft. But the state government did not clear this, instead of saying that the powers to do so are with the BMC, which does not need the government’s approval in this instance. “The cabinet has to clear such proposals where the tax levied by a civic corporation is planned to be completely done away with. In cases where a tax limit is reduced or changed, the powers rest with the corporation. So, it is up to the BMC to decided if it wants to extend the benefit of tax relief to units of up to 700 sqft carpet,” said an official.

Senior officials from the urban development department (UDD) said that there are 17 lakh units in Mumbai that are of carpet area less than 500 sq ft. “Property tax waiver will give relief to the residents of chawls and middle-class areas, which are big voter bases for any political party,” said a source. A civic official said the BMC’s annual target collection through property tax is Rs 5,600 crore. “We will take a hit of around Rs 400 crore due to this waiver on smaller flats,” he said.

Officials said that houses of up to 500 sq ft carpet are currently charged a nominal property tax, which is based on the capital value of the property and fixed on six parameters. Property tax is now the biggest source for revenue for the BMC and especially after octroi was subsumed by GST.

Also, if the BMC decides to go ahead with its proposal for 500-700 sq ft flats, it will cost the civic body another Rs 100 crore annually.

The opposition has slammed the government’s move to give tax reliefs before the polls. “The proposal for flats of up to 500 sq ft carpet was approved by the BMC in 2017 and the state government sat on it for two years. Decisions by the BJP and the Sena are taken only when elections are around the corner,” said Congress spokesperson Sachin Sawant.