Taxing trouble in mixed areas in Kolkata

KOLKATA : People living in apartments are likely to benefit from the new unit area assessment (UAA) for property tax that is likely to be introduced in April, 2017.
Under UAA, the annual value of the flat will be determined on the covered area of the flat. In the existing system, the tax is determined as an aggregated annual value of all flats within the building. The aggregated annual value, under the prevailing system, attracts the highest tax rate (40%).The valuation under the present system includes tax on vacant land, which will be much less under the UAA.
The second likely beneficiary in UAA will be house owners — other than landlords in north and central Kolkata, who have tenants on very low rates — who rent out a portion of the building. Take for example a person residing in a property for which he has to pay quarterly property tax of Rs 1,500 or Rs 500 monthly. If he rents it out for Rs 4,500, the property tax would be 40% of the sum total of annual rent (Rs 540,000) plus the usual property tax component. So an annual tax of Rs 6,000 here could go up to Rs 21,800 if the person had a tenant. Now under the new tax slab, it would be somewhere around Rs 11,000.
But this is just a fragment of the calculation of annual property tax that is derived by multiplying the base unit area value, factors like proximity of the building/flat to the main road or age of the building, covered space of the building and tax rate. The calculation, though simple, offers a riddle for civic bosses when it comes to mixed areas across the city. For instance, KMC officials are yet to arrive at a consensus over the tax rate it will charge on a building located within or close to a city slum when slums have been kept out of the tax net. The dilemma is also applicable to buildings coming up on purchased land in colony areas of Jadavpur, Bijoygarh, Netaji Nagar, Naktala and parts of Bansdroni across the Tolly’s Nullah. Civic officials fear these areas, which fall under D to G categories under the seven location categories the city has been divided, may witness a spike in tax rates.
The officials are also worried over old buildings in north and central Kolkata — College Street, Hatibagan, Goabagan, Taltala — that may witness a rise in tax because of their location advantage. Most of these areas will come under B and C categories, leading to tax push. However, this factor may be tempered to a certain extent due to the age of the building. Landlords in these areas may feel the pinch because old rent rates are too low for the new tax system. And this, despite the fact, that the KMC has fixed a lower tax rate for buildings aged more than 20 years.
This is the reason why KMC has kept room for moderation of tax based on representations from tax payers. “Assessment of the building value and computation of property tax are likely to change in the UAA system. This will result in changes. But we will keep an eye that the change is bearable. There is no doubt that property tax will shoot up in mixed areas, particularly those having slums and colonies, and also those in old Kolkata. The state government has thus passed a Bill in the Assembly recently that empowers the KMC to moderate the property tax beyond the usual UAA calculation,” said mayor-in-council member Debabrata Majumdar. This apart, the mayor is all set to form a screening committee with tax consultants, economists to examine petitions for taxpayers in case the tax rate is too high.