19

TOPIC NO. 4

BASIS AND PREVAILING RATES OF LOCAL TAXATION ON LAND

AND BUILDINGS WITH BRIEF ACCOUNT OF PROCEDURE FOR
VALUATION OF PROPERTY, ASSESSMENT AND APPEAL AND
REVISION AGAINST ASSESSMENT AND REVENUE FROM SUCH
TAXATION FROM 1997-98 TO 2002-03

CHENNAI CORPORATION

(a)The procedure being followed in arriving M.R.V. (Monthly Retable Value) on Residential
and Non-Residential properties.
As per Section 100 of the Chennai Municipal Corporation Act 1919 the concept of
reasonable letting value (R.L.V.) has been adopted to arrive at M.R.V. In this concept the
discretionary powers have more say in arriving at the M.R.V. To avoid this, area/location
wise basic rate was adopted during 1993-94, general survey to arrive at Reasonable Letting
Value after conducting survey for fixing the Basic Rate.

Method of Fixing Annual Value.

Example

Plinth Area x Basic Rate per sq.ft. = M.R.V.(i.e) Rs.100/-p.m.

Annual Rental Value Rs.100 x 12 = Rs.1,200.00

Less :10% for Land Value = Rs. 120.00

------------------
Rs.1,080.00
-----------------

Less 10% depreciation on the building = Rs.108.00

Depreciated value of the building = Rs.972.00

Add :10% of the land value arrived earlier = Rs.120.00

Annual Value for land and Building = Rs.1,092.00

For working Annual Value use the factor = 10.92

Annual Value = M.R.V x 10.92

b) Rates per sq.feet adopted for residential and Non-Residential properties.

The basic rate per sq.feet as follows:

1. Residential properties - minimum Re.0.40 to maximum Rs.1.60

2. Non-residential properties - minimum Rs.2.00 to maximum Rs.6.00

 20

The basic rates relates to tenant occupation. The 25% rebate over the basic rate has been
given for owner occupied buildings. Further concession of 20% for Semi-permanent building
like tiled, asbestos, thatched roof etc. For the age of the building 1% depreciation for each
year with minimum 5% to maximum 25%.

During 1998-99 General Survey, the following percentage increase has been given over the
existing M.R.V.

1) Residential owner occupied buildings - 20% to 25%

2) Residential tenant occupied buildings - 30% to 50%
3) Commercial owner occupied buildings - 50% to 90%
4) Commercial tenant occupied buildings - 60% to 100%

In respect of new buildings constructed after 1-10-98 the following percentage increase has
been given over the basic rate adopted during 93-94.

1) Residential Properties - 25%

2) Non-Residential Properties - 50%

Subsequently, Government is being addressed through council Resolution to increase the

percentage in the following manner to avoid disparity between existing building and new
building as on 1.l0.98.

1. Residential owner occupied properties - 25%

2. Residential tenant occupied properties - 50%
3. Commercial owner occupied properties - 90%
4. Commercial Tenant occupied properties- 100%

Method of fixing Annual Value for Vacant land

1. Under Occupation :

M.R.V. X 12 = A.R.V (No depreciation is allowed for land)

2. Vacant land

Rent per 2400 sq.ft.(One ground ) = Rs.8.00 p.m.

Annual Value (Rs.8.00 X 12 ) = Rs.96.00 p.m

3. Method of fixing Annual Value for Superstructure alone :

Monthly Rental Value X 12

Annual Value for land and Superstructure

Less 10% for land

Annual Value for Superstructure only.

 21

4.Calculation of Property Tax - (Per half year )

Grade Annual Value General Education Total Library Total

Tax Tax Cess
I Rs.1 to 500 3.75% 2.50% 6.25% 0.18% 6.43%
II Rs.501 to 6.75% 2.50% 8.25% 0.33% 9.58%
1000
III Rs.1001 to 7.755% 2.50% 10.25% 0.38% 10.63%
5000
IV Rs.5001 and 9.00% 2,50% 11.50% 0.45% 11.95%
above

c) The Method and practice being following and implemented in collection of Property Tax.
Method of payment
1. Each Property owner is given property tax Demand Card which is valid for 5 years.
2. The owner can pay the Tax at the Nominated Banks in each ward.
3. Tax Collectors are being utilised for collection of Taxes.
4. The owner can pay tax at the counters at Zonal Level and Head Quarters at Ripon
Buildings.
5. The Tax Collector can accept the payment only by cheque or Demand Draft and
issue receipts on the spot.
6. Cash payment will be accepted only at the authorized Banks.
7. Tax to be paid within 15 days from the commencement of half year.
Provision for Non-Payment of tax
1. Dishonoured Cheques will attract penalty.
2. Distraint warrant against the owner for distraining the movable properties
3. Occupier Notice to pay the rent payable to the owner to the Corporation of Chennai,
in default distraint warrant can be issued.
4. Filing of Civil Suit for recovery of arrears of Tax.

Other information pertaining to this subject

The following special type of buildings are being assessed with separate formula.

1 Nursing Home / 1. Total Income per year arrived as per Tariff rate per
Hospitals room out of which 13 ½% to be taken as Annual Rental
Value and add to this,
2. Other Commercial Portions like Pharmacy, other
consulting rooms to be calculated as per other buildings

2 Star Hotels & Total Income per year arrived as per Tariff rate per room.
Lodging Houses Star Hotels 10% of the Income. A Class-20% of the Income.
B Class-25% of the Income and add to this other
Commercial portions like restaurant, Bar, Shops etc, to be
calculated as per other Commercial buildings.

3 Theatres Total Income out of which 60% to be taken and remaining

40% towards Entertainment tax for Government. Out of
60%, 53% to be taken as income, out of which A Class
71/2% B Class 61/2% to be Annual Rental Value and add to
this canteen, Cycle stand Income.
 22

4 Marriage Halls A Class-Rate per Marriage X 40 Marriages

B Class-Rate per Marriage X 30 Marriages
C Class-Rate per Marriage X 20 marriages
out of total income 50% will be the Annual Rental value if
vessels and furnitures provided, if not 60% of Income will be
Annual Rental Value.

Revision of Tax

As and when the Annual Value of any buildings (which is already assessed to
Property tax) appreciated due to additional, alterations or change in nature of occupation
etc. the assessment is revised as per the rates indicated above.

Objection petitions.

Against the orders of the enhancement issued under provisional notice the property
owners are given chance to file objection petitions regarding wrong printing of Existing
Annual Value, half-yearly Tax Plinth area, Name correction, door No. Bill No corrections etc.
After rectifying the objection final orders are passed by the Commissioner by way of issuing
Final Notice orders.

Taxation Appeal Tribunal:

Under Rule 14 of schedule IV of the M.C.M.C. Act 1919 when the owner is dis-satisfied
with the orders of the Commissioner on the quantum of tax fixed, the owner may file an
appeal to the Chairman, Taxation Appeals Tribunal.

The Court of Small Causes:

When Owner is not satisfied with the decision of the Chairman, Taxation Appeals Tribunal
he may file an appeal to Court of Small Causes and further appeal to High Court and
Supreme Court.

Revenue from Property Tax:

YEAR AMOUNT IN LAKHS

1997 - 1998 10850.00
1998 - 1999 11870.00
1999 - 2000 11505.00
2000 - 2001 13103.00
2001 - 2002 16636.00
2002 - 2003 17710.00
 23

MADURAI CITY MUNCIPAL CORPORATION:

In Madurai Corporation, Assessment of Tax was given effect based on the

approximate rental value of the building before 1.4.1993. From 1.4.1993 during General
revision, the Taxation based on the rental value was changed into the actual measurement
of the building and the assessment is now being made based on the square feet of the
respective buildings. The areas covered inside the Madurai Corporation had been divided
into eight part, such as c1,c2,c3,c4, R1,R2,R3 and R4 and all the streets covered with the
Madurai Corporation was included with the above eight parts. The rate for the RCC building
Madras terrace, light roof and tiled building, AC sheet Terraced building, Tin sheet terraced
building and thatched shed building was fixed separately. At the same time the rate for
Ground floor, First floor Second floor etc was also fixed. Separate rate was fixed for the
commercial buildings and residential buildings.

The Annual rental value was calculated based on the rate fixed per square feet, 20%
of annual rental value was deducted for owner occupation buildings. For all buildings a
common deduction of 1/15 was given. Separate rate was fixed for the special buildings such
as for lodges, Kalayana Mandapam, Theatre, Hospital, Educational Institution, Factories,
Rice mill, Petrol Bunk and cottage Industries etc.,

The assessment of Taxation for all the buildings was fixed not exceeding to one fold.
The annual income of Property Tax of Rs.7.81 crores prior to 1.4.93 was raised to Rs.10.75
crores after 1.4.93 General revision (i.e) because of 38% increase.

During 1.10.98 General revision, 20 percent for residential building, 50 percent for
Commercial buildings and 75 percent for special building was increased based on the rate
fixed in 1.4.93 General revision. Further maximum increase of one fold for the residential
buildings, one and half fold for the residential and commercial combined buildings, and two
fold for commercial building was fixed. As such Rs.10.75 crores being the demand for
property tax prior to 1.10.98 There is an increase at 91.1% and it was increased to (i.e)
Rs.20.57 crores after 1.10.98 General revision.

Now, the following procedures to be after 1.10.98 General Revision adopted for the
ensuing 1.10.2003 public revision: -

1. To measure and assess all the buildings.

2. The ceiling fixed for the last two General Revision without any omission to be
cancelled.
3. The assessment should be done based on the building and the usage of the building.
4. If the open space is higher than the building constructed portion, 50% of the building
area plus open space to be calculated for the balanced portion of the vacant site and
to be fixed as vacant site tax.
5. Present tax rate of 27% for the existing Madurai Corporation area and 20% for newly
added area have to be changed to 27% for all Madurai Corporation area for
assessment of Property Tax irrespective of added areas.
6. Service tax to be assessed for all exempted building except places, like as temples,
mosques, church etc.,
7. The Hospital building which are assessed @ residential rate at present have to be
assessed @ commercial rate from 1.10.2003.
 24

COIMBATORE CORPORATION

A brief notes of procedures for valuation of property, assessment and appeal

and revision against assessment and revenue from such taxation from 1992-93 to
2002-03. ]

Under Section 121 of the Coimbatore City Municipal Corporation Act 1981, as
amended the property tax shall be levied on all buildings and lands within the city.

The tax comprises the following

1. Taxes for General Purpose

2. Water Supply and Drainage Tax
3. Education Tax

Assessment of lands:

The land not used exclusively for agriculture purpose and are not occupied by or
adjacent and appurtenant to buildings, is assessed to tax under Section 121(4) of
Coimbatore Corporation Act 1981. The tax is being levied at 1.125% on the capital value of
the land as per G.O.Ms.No.775 Rural Development & local Administration Department,
dated 27.5.1983.

Assessment of Buildings:

Upto 31.3.1994, the buildings were assessed at the estimated annual rental value of
the buildings. As amended, in G.O.Ms.No.1180, Municipal Administration and Water Supply
Department, dated 10.12.87 and resolved in M.C.R.No.58 dated 24.5.1993 and 403, dated
4.11.1998 the buildings are being levied under plinth area system with effect from 1.4.2003.
The owner of any land and building has to file a return to the Corporation, containing the
particulars of the building such as plinth area, usage, location, type of construction and year
of the building. A monthly return is prescribed to be furnished by the Tax Collector to the
effect of new buildings to be brought up under property tax. Hence, irrespective of the fact
whether the building owner is furnished the return for assessment or not, there are
possibilities to bring all the new/additional buildings under property tax assessment.

With reference to the particulars and on inspection of the buildings to ensure the
genuineness of the particulars given by the applicant, the buildings are being assessed
under Property tax at the rates fixed by the Corporation as detailed below:

Rates I. Usage w.e.f. 1.4.2003 w.e.f.1.10.1998

1) Residential Rs.2.50 per sq.ft. Rs.3.00 per sq.ft.
2) Industrial Rs.4.00 per sq.ft. Rs.5.00 per sq.ft.
3) Commercial Rs.5.00 per sq.ft. Rs.6.50 per sq.ft.
4) Office Rs.6.00 per sq.ft. Rs.7.50 per sq.ft.
5) Lodging and Cinema Theatre Rs. 6.00 per sq.ft. Rs.7.80 per sq.ft.
6) Star Hotel Rs.8.00 per sq.ft. Rs.11.20 per sq.ft.
 25

II. Location:
1) Huts Nil Nil
2) Without basic amenities 20% 20%
3) With basic amenities 30% 30%
4) Residential-cum-Commercial 50% 50%
5) Commercial 75% 75%
III. Type of Building:
1) Cement Sheet Roofing 10% 10%
2) Tiled 20% 20%
3) RCC Roofing/Cement Flooring 50% 50%
4) RCC/Mosaic Flooring 75% 50%
5) RCC/A.C. facilities 100% 100%
IV. Age of the building:
Upto 10 years 50% 50%
Above 10 years below 20 years 30% 30%
Above 20 years below 30 years 20% 20%
Above 30 years below 40 years 10% 10%
Above 40 years Nil Nil

After arriving the Annual Value of the building as per rates as above, the property tax
is being levied at the percentage fixed by the Council under Section 121 of Coimbatore City
Municipal Corporation Act 1981 as detailed below:

Sl.No. Area Profession Education Total

Tax Tax
1. Coimbatore City area 15.5% 2.5% 18%
2. Singanallur Municipal area 12.5% 2.5% 15%
3. Sanganur
4. Ganapathy 8.5% 2.5.% 11%
5. Vilankurichi
6. Komarapalayam 10% 2.5% 12.5%
7. Coimbatore Rural 8.5% 2.5% 11%
8. Telengupalayam 7.5% 2.5% 10%

In addition to this, 10 paise per rupee towards Library cess is being levied along with
property tax with effect from 1.4.92.
 26

Penalty:

Besides the property tax, a penalty of Rs.50/- per unit i.e. per 100 sq.ft. and part
thereof per half year is being levied along with property tax, for the buildings which were
constructed unauthorizedly and deviated to the approved plan, under Section 283 of
Coimbatore City Municipal Corporation Act 1981. This is being done from 1.4.1993
onwards.

Property tax card:

Sending of Demand Notice to the tax payers was dispensed with as per
G.O.Ms.No.1180, Municipal Administration and Water Supply Department, dated
10.12.1987. Instead of demand notice, a property tax card containing the details of name
and address of the assesses, Assessment No., details of type of building, Annual Value of
the building, property tax levied and period from which levied and penalty amount fixed etc.,
will be issued to the tax payer, as soon as the new assessment is made, along with Special
Notice for the new assessment. This book is valid for 5 years or the tax is revised whichever
is earlier. The tax payers should pay the tax automatically every half year, on the due dates
as per provisions made in the Act.

Revision of Tax:

Except the General Revision, the existing tax is revised as and when the Annual
value of the building is to be revised due to construction of additional building, or due to
change of use of the building.

Taxation Appeal Tribunal:

Under rule 20 0f schedule II of the Coimbatore City Municipal Act 1981 Part V, a
Taxation Appeal Tribunal is constituted for hearing and disposing of appeals preferred by
any person who is not satisfied with levy of property tax made by the Commissioner under
Coimbatore Municipal Corporation Act.

Such appeal may be filed within 30 days from the date of receipt of Special Notice for
the new Assessment made and disposed off by the Tribunal within 5 months from date of
filing appeal.

Revenue from property tax (Both Arrear and Current)

Year Amount in lakhs

1997-1998 Rs.1031.49
1998-1999 Rs.3305.00
1999-2000 Rs.3385.82
2000-2001 Rs.3444.07
2001-2002 Rs.3147.93
2002-2003 Rs.3204.11
 27

TIRUCHIRAPPALLI CITY CORPORATION

The Coimbatore City Municipal Corporation Act (XXV of 1981) also applies to
Tiruchirappalli City Corporation, which was constituted since 1.6.94. Sections 121 and 122
of the above said Act and paras 4 to 9 of the taxation rules in part I of schedule II made
under the Act describes the guidelines and procedures for making assessment of lands and
buildings within the Corporation limit.

2. Present Rate of Taxation:

As per Sec 121 (1) of the Act, the Tiruchirappalli City Corporation council in its
Resolution No 2, dated 11.1.99. has resolved to fix the basic tax and the rate of additional
value for arriving annual value of the building to be assessed. After arriving the annual
value, the levy of property tax is as follows on the above value.

The components of rate of taxation is 17.35% Half yearly of the annual value is as
follows.
General Purpose 6.50%
Water Supply and Drainage 7.00%
Education 2.50%
Library chess 1.35%
17.35 %

Appeal and Revision against assessment:

The assesses are served with special notice soon after the Assessment is made. If
the assessee is not satisfied with the assessment or revision and if he thinks that the tax so
assessed or revised is on the higher side he may prefer an appeal to the taxation appeal
Tribunal headed by a judicial officer in the rank of Sub-Judge. The Assessee who prefer an
appeal shall pay while filing the appeal the old tax and 50% of the enhanced tax within 15
days from the date of receipt of the special notice.

Revenue from Property tax:

The Demand, Collection and Balance statement for the period from 1997-98 to
2002-03 is furnished below.

Year Demand Collection Balance

1997-98 1984.17 960.62 1023.85

1998-99 2471.59 975.07 1496.52

1999-2000 2964.62 1302.89 1661.73

2000-2001 3786.03 1277.77 2508.26

2001-2002 4254.34 1666.31 2588.03

2002-2003 4374.20 1770.55 2603.65

 28

(The demand, collection and balance includes current and arrears.)

SALEM CORPORATION

The Salem Municipality has been upgraded to City Municipal Corporation with effect
from 1st June 1994.

Basis of taxation & procedure for assessment:

The same as in Coimbatore Corporation as detailed below.

The property tax on the buildings has been levied on the following three methods:-

On annual rental value of the building

At 6 percent on the capital cost; and

As per the guidelines issued by the Govt.

For a rational and moderate assessment the entire town has been divided into four
categories as mentioned below:

A Zone - Re. 1/- per sq. ft.

B Zone - Re. 0.75 ”
C Zone - Re. 0.50 ”
D Zone - Re. 0.25 ”

Apart from Demarking the area, the rates have been decided for the rental value
fixed for various streets and ward as approved by the Council. In this process, separate
weightage has been given for residential usage and commercial usage. As warranted by the
act, the provisional demand notice were issued to all assesses calling for claims and
objections if any. The claim and objections received were disposed of and the demand
notices were issued to all the assesses.

Revenue from Property Tax

Year Amount
(Rs. in lakhs)
1997-1998 561.46
1998-1999 595.45
1999-2000 1121.00
2000-2001 1009.86
2001-2002 1215.13
2002-2003 1234.93

Rates of Taxation:

The rates of property tax are furnished as follows:-

 29

Components of property tax on the annual value and rates thereon with effect from
1.4.1970 as per Council Resolution No. 2765, dated 21.3.1970 for erstwhile Salem
Municipality.

General Tax Education Tax Library Cess

(percent) (percent)

Old Salem Municipal 13.75 2.50 10 paise from 1.4.92

Area except Education
Tax

Basis of Taxation on Lands:

The vacant land tax is being levied at the rate of 5/8 % on capital value of the plus
library cess 10 paise per Rupee excluding Education tax.

The rate of taxation is as below.

1. General Purpose 1/4

2. Scavanging 1/16
3. Lighting Tax -
4. Water Tax -
5. Drainage Tax 1/4
6. Educational Tax 1/16
7. Library Cess -
---------
5/8
---------
Appeal & Revision against assessment:

The Same as in Madurai Corporation as detailed below:

If the assessee thinks that the increase is on the higher side, they can prefer an
appeal to the Taxation Appeal Tribunal headed by a Judicial Officer in the rank of Sub-
Judge. The Assessee who prefer the Appeal shall pay while filing the appeal, the old tax
and 50% of the enhanced tax within 15 days. The Appeal will be taken by the Appeal
Committee only after the payment of the tax mentioned above within 15 days. The Tribunal
will dispose off the petition within the period of 5 months on the appeal.
 30

TIRUNELVELI CITY MUNICIPAL CORPORATION:

Tirunelveli City Municipal Corporation has been upgraded to City Municipal

Corporation with effect from 01.06.1994. The levy of tax is fixed as per the annual rental
value. For arriving the ARV the rate has been fixed based on the area as per sq.ft as per the
zone wise classification. Zones have been classified as A, B,C, D by area wise. After
arriving the annual rental value the tax is levied at 27.50%.

Then if the building is used for rental the tax has been fixed in double times, for
commercial the tax is fixed in triple times.

Revenue from property tax (Amount in lakhs)

1999-2000 Rs.767.02
2000-2001 Rs.699.71
2001-2002 Rs.735.43
2002-2003 Rs.826.07

Rates of Taxation:

Tirunelveli City Municipal Corporation -- General purpose -- 22.50% G.P.

5.00% Education
---------------
27.50% Total
--------------
Appeal and revision against assessment:

If the assesses think that the increase is on the higher side, they can prefer an
appeal to the taxation appeal tribunal headed by a judicial officer in the rank of sub-judge.
The assessee who prefer the appeal should pay the full amount of tax while filing the appeal.
The appeal will be taken by the Appeal Committee only after the payment of full amount of
tax.
 31

MUNICIPALITIES

Section 81 of the Tamil Nadu District Municipalities Act, 1920 empowers the
Municipal Councils to levy property tax on all buildings and lands within the municipal limits
except such of those that are specifically exempted by this Act or under any other law. The
tax comprises of general purposes; water supply and drainage; lighting and scavenging;
Railway tax is to be levied solely for or to further construction and maintenance of railways,
if so resolved by 3/4 councilors of municipal council and sanction is accorded by the State
Government.

Apart from the property tax, a tax on buildings is also levied for purposes of
elementary education under the Elementary Education Act.

The income derived from the property tax has become the major source of income to
all the municipalities.

Part - I Basic for Taxation.

At present no maximum or minimum rate of tax has been prescribed in the Tamil
Nadu District Municipalities Act., 1920 and the rules issued thereunder. However, in the
case of tax on land not used exclusively for agricultural purposes and not occupied by or
adjacent or appurtenant buildings, the maximum of 2 percent per annum on the capital
value of such lands has been fixed. Similarly, Elementary Education Act prescribes the
maximum of five percent for the Elementary Education.

Prevailing Rates of Taxes:- The rate of taxation with the components as adopted in various
municipalities is in vogue from 7.5 percent to 26 percent of the Annual Rental Value per half
year. The schedule of present rates of property tax in respect of all Municipalities is
annexed.

The present system of property taxation in the municipalities does not also make
any distinction among the properties depending on the use to which they are put. Thus,
properties used for industrial, commercial and business purposes are taxed at the same rate
as properties used for dwelling purposes but based on different rental value as prevailing.
All the municipalities have sought resort to the levying and collecting license fees on
Dangerous and Offensive trades under the provisions of Section 249 and 321 of the Tamil
Nadu District Municipalities Act, 1920. No appreciable income could be derived from this
source.

Basis for assessment:- The basis for assessment of the property tax in the municipalities is
the Annual Rental Value in respect of buildings and Capital Value in respect of lands
occupied by such buildings or appurtenant and adjacent to such buildings. The annual value
of lands and buildings as such be deemed to be the gross annual rent at which they may
reasonably be expected to let from month to month or from year to year (less a deduction in
the case of buildings, of ten percent of that portion of such annual rent which is attributable
to the building alone, apart from their sites and adjacent lands occupied as an appurtenance
thereto) and the said deduction shall be in lieu of all allowances for repairs or on any other
account whatever may be.
 32

Provided that:

(a) in the case of

(i) any Government or Railway buildings or

(ii) any buildings of class not ordinarily let, the gross annual rent of

which cannot, in the opinion of the (executive authority), be estimated.

the annual value of the premises shall be deemed to be six percent of the total of the
estimated value of the land and the estimated present cost of erecting the building after
deducting for depreciation a reasonable amount which shall in no case be less than ten
percent of such cost;

(aa) in the case of any building in industrial estate wherein essential amenities
including water supply, drainage and lighting are not provided by the municipality but
provided by the Industries Department of the State Government or by any other authority
under the control of the State Government, the annual value of such buildings shall be
deemed to be four percent of its capital value.

Provided that if any question arises whether for the purposes of this clause, essential
amenities are provided by the Industries Department or other authority, it shall be decided by
such authority as may be prescribed.

The first assessment of the property tax is made by the Commissioner of the
Municipality assisted either by his Personal Assistant or Revenue officials. These
assessments are revised during the quinquennial revision of property tax. General revision
is undertaken by the Municipal Commissioner based on the suitable guidelines for fixing the
reasonable annual value of land and building issued by Commissioner of Municipal
Administration.

Revision and Appeals:- In between general revisions, the Executive Authority is to assess
all new buildings through monthly lists. These lists are checked by the Revenue Inspector
and the Revenue Officer before the inspection and fixation of rental value by the Municipal
Commissioner for tax assessment. After fixation of rental value by the Municipal
Commissioner, special notices are being issued to the owners or occupiers of the buildings
intimating them that the value of the properties has been assessed and that they may move
the Executive Authority over revision petition within 30 days from the date of receipt of the
special notice. Any such revision petition received is required to be considered and the party
heard in person before the assessment is finalised.

Under the provisions of the Tamil Nadu District Municipalities Act 1920, tax payers
file their petition against assessment orders to the Municipal Commissioners concerned and
then to the concerned Taxation Appeal Committee of the Municipal Councils against the
orders of the Municipal Commissioner.

The Municipal Council shall also levy in case of lands used for agricultural purpose,
this tax at such proportions as it may fix on the Annual Rental Value of such lands as
calculated in accordance with the provisions of section 79 of the Madras District Boards Act
1920. Government have fixed the maximum rate as 87 1/4 percent land revenue levied and
the above tax was abolished by Government from 1st April 1981 onwards.
 33

Part II Changes made during the Year 1976-96:-

I. Consequent on the several judicial decisions regarding the assessment of property

tax, Government have ordered to assess the property tax with reference to Tamil Nadu Rent
Control Act 1960 according to which the fair rent in respect of residential buildings is fixed at
9 percent of the capital cost of the buildings and in the case of non- residential buildings, the
rate is 12 percent. This has been again modified to the effect that the assessing authorities
have to adopt only Annual Rental Value for buildings and Capital Value for lands which are
not ordinarily let.

II. The income realised from the Agricultural land tax was very meagre and much
difficulties were experienced in the collection of this tax. The Government, therefore, in their
G.O [Ms] No: 434 Rural Development and Local Administration, dated: 19th March 81 have
abolished the levy of this tax with effect from 1st April 1981.

III. As per section 83 of the Tamil Nadu District Municipalities Act 1920, as amended
by Act No: 17 of 1990, no property tax is levied for the buildings for which the Annual Rental
Value is below Rs.180/-

IV. Under section 345 of Tamil Nadu District Municipalities Act 1920 describes that, “ no
distraint shall be made, no suit shall be instituted and no prosecution shall be commenced in
respect of any sum due to municipal council under this Act, after the expiration of a period of
three years from the date on which distraint might first have been made, a suit might have
been instituted or prosecution might first have been commenced, as the case may be, in
respect of such sum.” In G.O[Ms] No: 43 Municipal Administration and Water Supply
Department, dated: 12.02.96, Government have ordered to enhance limitation period of
three years to six years and necessary amendment will be issued by Government.

SUBSEQUENT CHANGES

Amendments have been made in the Tamil Nadu Municipal Laws [Second
Amendment] Act 1997 in Act No: 65 of 1997 published in the Tamil Nadu Government
Gazette on 07.11.97 for sections of 81, 81A, 82, 83, 84, 85, 86, 87, 88 & 89 and rules from 06
to 15 & from 23 to 28-A in Schedule IV of Part-I in Taxation and Finance Rules under Tamil
Nadu District Municipalities Act 1920, changing the basis of the determination of property tax.

The date from which the new system will take effect is to be notified along with the
rules to be issued.

The salient features of the amended provisions are narrated below :-

Section 81: Levy of property tax

1.The property tax is levied on all buildings and lands within the municipal limits.

2. The owner or occupier shall furnish to the Executive Authority within such time as
may be prescribed, a return in such form containing such details as may prescribed for the
assessment of property to such buildings or land.
 34

Section 82: Minimum and maximum basic and additional basic property tax :-

The State Government shall prescribe the minimum and the maximum rates of:

(a) basic property tax for the building or land having regard to-

(i) the existing property tax:

(ii) the value of the buildings and land; and
(iii) the use of the buildings

(b) additional basic property tax for every buildings having regard to-

(i) the location of the buildings;

(ii) the type of construction of the buildings;

(c) the concession with regard to age of the building

Section 83: Determination of property tax by municipal council.

(1) The basic property tax, the additional basic property tax and the
concession, if any, with regard to the age, for every building or land shall be determined by
the municipal council subject to the minimum and maximum rates prescribed by the State
Government under section 82.

(2) The Municipal Council shall notify the rates determined under sub section
(1) and such other particulars and in such manner as may be prescribed.

(3) (i) (a) The basic property tax for every building shall relate to the carpet
area of the building and its usage;

(3) (i) (b) The classification of the building for the purpose of deciding the
usage of any building shall be residential, commercial, industrial or any other classification as
may be prescribed.

(3) (ii) (a) The additional basic property tax for every building shall relate to
location and type of construction of the building.

(3) (ii) (b) For the purpose of this clause, the location of the building shall be
classified as follows :-

(A) arterial roads, bus-route roads leading to arterial roads and thar roads;

(B) bus-route roads other then those specified in item (A);

(C) roads and streets in primarily residential colonies.

(3) (ii) (c) The type of construction of the buildings shall be classified into
different groups as follows, namely:-

(A) thatched and tiled roof ;

(B) reinforced concrete, cement roof ;

(C) reinforced concrete cement roof with mosaic flooring and walls partly
or fully ;
 35

(D) granite, ceramic tiles and marble flooring and walls partly or fully ;

(3) (iii) A concession on basic property tax shall be allowed in calculating the
property tax having regard to the age of the building, in such manner as may be prescribed.

Section 84: Assessment and calculation of property tax :-

For the purpose of levy of property tax, every building shall be assessed together with
its sites and other adjacent premises occupied as an appurtenance thereto;

A property tax book containing all the details of the building or land and the property
tax payable has to be issued to the assessee.

Section 85: General revision :-

The general revision of the assessment of Property Tax in relation to the building and
land situated within the municipal limit shall be made from such date appointed by the State
Government. There shall be an interval of five years between one general revision and
another general revision.

Section 86: General exemption :-

Places set apart for public worship, choultries, buildings used for educational purpose,
ancient monuments and archaeological sites, charitable hospitals and dispensaries, burial and
burning grounds, bed of river or canal or any river or canal belonging to Government which do
not provide any income are exempted from property tax.

Section 87: Power to rectify error apparent on the face of record :-

The assessee is entitled to submit a revision petition to rectify any error of assessment
only once at any time within six months from the date of any order passed for assessment or
reassessment. Where such rectification has the effect of reducing an assessment, the
excess amount, if any paid, shall be adjusted towards any tax that may accrue in future.

Section 88: Levy of fine :-

Where a person fails to pay the property tax within the time specified the executive
authority shall impose upon him, by way of fine, a sum as fixed by the municipal council in
this behalf in accordance with such rates, as may be prescribed.

Section 89 : Taxation Appeal Committee :-

An appeal may be preferred to the Taxation Appeal Committee of the council. If the
assessee is not satisfied with the decision of the Taxation Appeal Committee, the assessee
may prefer an appeal to the District Judge within thirty days from the date of order of the
Taxation Appeal Committee, but only after paying the entire amount of tax decided by the
Taxation Appeal Committee.
 36

PROCEDURES FOLLOWED AT THE TIME OF GENERAL PROPERTY TAX

REVISION 1998.

The last quinquennial revision in Property tax took place with effect from 01.10.98.
Earlier, certain amendments were made in the provisions relating to property tax and after
being passed by the Legislative Assembly. Early in September 98, Government decided to go
on with the revision, as per the existing rules and procedures followed on the previous
quinquennial revision with effect from 01.10.93.

Instead of serving the special notice to the owner or occupier of the property on the
first day of the half-year under the rule in force, the special notice will be issued to the owner
or occupier of the property by all executive authorities of Municipalities during the half year
period from 01.10.98 to 31.03.99 pending amendment to the rules, for the general revision of
tax.

Regarding the Municipalities, the methodology adopted for quinquennial revision of

property tax from 01.10.93 was continued to be adopted for the subsequent quinquennial
revision with effect from 01.10.98. Assessments are to be based on the returns filed by the
owners and if the returns are not filed within the specified date, the property concerned will be
inspected by the concerned authorities and based on that a special notice will be issued to the
owner / occupier of the property.

Revenue from property tax

MUNICIPALITIES

Year Amount
(Rupees in lakhs)
1997-1998 9376.01
1998-1999 11936.61
1999-2000 17679.15
2000-2001 15680.58
2001-2002 17076.99
2002-2003 17795.89

General:-

The Second State Finance Commission has recommended that, levy of property tax
may be done as enshrined in the Tamil Nadu Urban Local Bodies Act 1998, during the next
revision due from 1st October 2003. If for any reason, the Act provisions could not be given
effect to prior to the revision, the provisions dealing with property tax, as contemplated in the
Tamil Nadu Urban Local Bodies Act 1998 may be incorporated in the Act in force at that time.
The periodicity of revision will be quinquennial in respect of residential and non-residential
properties will be once in two years.

For ensuring zonal rates, a property tax Guideline Committee may be constituted for
each municipality consisting of the Municipal Commissioner, Municipal Engineer and Town
Planning Officer of the concerned Municipality.
 37

TOWN PANCHAYATS

There are 611 Town Panchayats in the State. Hitherto, the house tax in Town
Panchayats were assessed by the Town Panchayats under the provisions of the Tamil Nadu
Panchayat Act 1958. As per the 74th Amendment the Town Panchayats have been brought
under the purview of Tamil Nadu Municipalities Act, 1920 with effect from 31.5.1994 and the
system of property tax has been introduced. All the reforms and recommendations on
assessment, levy, appeal, collection and distraints suggested to Municipal
Corporations/Municipalities will apply to Town Panchayats also. As per the amendment the
levy of property tax is based on the following:

1. Basic Tax
2. Additional Tax for location of building
3. Additional Tax for classification of building
4. Concession to be given for the age of building
5. Penal fees to be collected for the belated payment
6. Fine to be imposed for non-submission of returns by the owner or occupier and
for furnishing false information
7. Vacant land tax and education tax

Previously the tax was assessed by the officials but, as per the amended Act, tax is
being assessed by the owner or occupier themselves based on the carpet areas, usage,
location and nature of construction of the building.

Section 81 of the Tamil Nadu District Municipalities Act, 1920 empowers the Town
Panchayats to levy property tax on all buildings and lands within the municipal limits except
such of those that are specifically exempted by this Act or under any other law. The tax
comprises of general purposes, water and drainage, scavenging, lighting etc.

The income derived from the property tax has become the major source of income to
all the Town Panchayats.

Basis for Taxation

At present no maximum or minimum rate of tax has been prescribed in the Tamil
Nadu District Municipalities Act, 1920 and the rules issued there-under. However, in the
case of tax on land not used exclusively for agricultural purposes and not occupied by or
adjacent or appurtenant buildings, the maximum of 2 percent per annum on the capital value
of such lands has been fixed.

Prevailing Rates of Taxes:

The rate of taxation with the components as adopted in various Town Panchayats
shall be as per resolution of the Town Panchayat.

Basis for assessment:

The basis for assessment of the property tax in the Town Panchayat is the annual
rental value in respect of buildings and lands occupied by such buildings or appurtenant and
adjacent to such buildings. The annual value of lands and buildings shall be deemed to be
the gross annual rent at which they may reasonably be expected to let from month to month
or from year to year (less a deduction in the case of buildings, of ten per cent of that portion
of such annual rent which is attributable to the buildings alone, apart from their sites and
adjacent ‘lands occupied as an appurtenance thereto) and the said deduction shall be in lieu
of all allowances for repairs or any other account whatever:
 38

Provided that:

(a) in the case of

(i) any Government or railway building or
(ii) any building of a class not ordinary let, the gross
annual rent of which cannot in the opinion of the (executive authority)
be estimated.

The annual value of the premises shall be deemed to be six per cent of the total of
the estimated value of the land and the estimated present cost of erecting the building after
deducting for depreciation a reasonable amount which shall in no case be less than ten
percent of such cost.

(aa) in the case any building in industrial estate wherein essential amenities including
water supply, drainage and lighting are not provided by the municipality but provided by the
Industrial Department of the State Government or by any other authority under the control of
the State Government, the annual value of such building shall be deemed to be four percent
of its capital value.

Provided that if any question arises whether for the purpose of this clause, essential
amenities are provided by the Industrial Departments or other authority it shall be decided by
such authority as may be prescribed.

The first assessment of Property tax is made by the executive authority assisted by
the Bill Collector of the Town Panchayat. This assessment is revised once in five years.
General revisions are undertaken by the Executive authorities.

Revision and Appeals:

In between general revision, the Executive Authority is to assess all new buildings
through monthly lists. These lists are checked by the Bill collector before the inspection and
fixation of rental value by the Executive authority for tax assessment. After fixation of rental
value by the Executive Officer, Special notices are issued to the owners of the building
intimating them that the value of the properties has been revised and that they may move
the Executive Authority over revision petition within 30 days from the date of receipts of the
special notice. Any such revision petition received is required to be considered and the party
heard in person before the assessment is finalized.

Under the provisions of the Tamil Nadu District Municipalities Act 1920 tax payers file
their petition against assessment orders to the Executive Officers and then to the Taxation
Appeal Committee of the Town Panchayats against the orders of the Executive Officer.

The Town Panchayat Councils are empowered under Section 118 of the Tamil Nadu
District Municipalities Act, 1920 to write off tax amount due to the Town Panchayats if in the
opinion of the council such tax or amount is irrecoverable. The Section does not limit the
powers of the Town Panchayat Councils.

SUBSEQUENT CHANGES:

As per section 83 of the Tamil Nadu District Municipalities Act, 1920 (as amended by
Act 17 of 1990) no property tax is levied for the buildings for which the Annual Rental Value
is below Rs.180/-.
 39

Amendments have been made for the provisions of Tamil Nadu District Municipalities
Act, 1920 for sections 81, 81A,82,83,84,85,86,87,88,89,90 & 91 changing the basis of the
determination of property tax. The date from which the new system will take effect is to be
notified along with the rules to the be issued.

The salient features of the amended provisions are narrated below:

1) the property tax is levied on all buildings and land within the Town Panchayat

2) The owner or occupier shall furnish to the Executive Authority within such time as
may be prescribed, a return in such form containing such details as may be
prescribed for the assessment of property tax to such building or land.

The State Government shall prescribe the minimum and the maximum rates of:

a) basic property tax for the building or land having regard to-

i) the existing property tax

ii) the value of the building and land; and
iii) the use of the building

b) additional basic property tax for every building having regard to

i) the location of the building;

ii) the type of construction of the building

c) the concession with regard to age of the building.

83. (1) The basic property tax, the additional basic property tax and the concession, if
any with regard to the age, for every building or land is determined by the Town
Panchayat Council subject to the minimum and maximum rates prescribed by the State
Government under section 82.

(2) The Town Panchayat Council shall notify the rates determined under sub section (1)
and such other particulars and in such manner as may be prescribed.

(3) (i) (a) The basic property tax for every building shall relate to the carpet area of the
building and its usage.

(b) The classification of the building for the purpose of deciding the usage of any building
is residential, commercial, industrial or any other classification as may be prescribed.

(ii) (a) The additional basic property tax for every building shall relate to location and type
of construction of the building.

(b) For the purpose of this clause, the location of the building is classified as follows:

(A) Arterial roads, bus-route roads leading to arterial roads and main roads.
(B) Bus route roads other than those specified in item (A);
(C) Roads and Streets in primarily residential colonies.

(c) The type of construction of the building is classified into different groups as follows
namely:-

(A) thatched and tiled roof:

 40

(B) reinforced concrete, cement roof:

(C) reinforced concrete cement roof with mosaic flooring partly or fully;
(D) granite, ceramic tiles and marble flooring and walls partly or fully.

(iii) A concession on the basic property tax is allowed in calculating the property tax
having regard to the age of the building, in such manner as may be prescribed.
84 (I) For the purpose of levy of property tax, every building is assessed together with its
sites and other adjacent premises occupied as an appurtenance thereto:

A property tax book containing all the details of the building or land and the property
tax payable has to be issued to the assessee.

The General revision of assessment of Property Tax is to be made from such date
appointed by the State Government. There is an interval of 5 years between one
general revision and another general revision.

Places set apart for public worship, choultries, buildings used for educational
purposes ancient monuments, charitable hospitals and dispensaries, burial and burning
grounds, bed of river or canal or river or canal belonging to Government which do not
provide any income are exempted from property tax.

The assessee is entitled to submit a revision petition to rectify any error of

assessment only once at the time of assessment or reassessment.

An appeal may be preferred to the Taxation Appeal Committee of the Council. If the
assessee is not satisfied with the decision of the Taxation Appeal Committee, he may
prefer an appeal to the District Judget only after paying the entire amount of tax decided
by the Taxation Appeal Committee.

The revenue demand from the property tax during the last 6 years is as follows:
Revenue from Property Tax:

Year Description Amount (Rs. in lakhs)

1997-98 House Tax 1867.51

1998-99 Property Tax from 1.10.1998 1491.37

1999-2000 Property Tax 4847.92

2000-2001 Property Tax 5051.72

2001-2002 Property Tax 4917.36

2002-2003 Property Tax 5274.05S

 41

VILLAGE PANCHAYATS

The Tamil Nadu Panchayats Act, 1958 provides the Panchayats to levy and collect
the following taxes which are the major sources of income to Village Panchayats.

a) House Tax
b) Profession Tax
c) Taxes on Agricultural Land and specific purposes

Consequent on the 73rd Constitutional (Amendment) Act, 1992, the Tamil Nadu
Panchayats Act, 1958 had been repealed and the Tamil Nadu Panchayats Act, 1994 had
been enacted which came into effect from 22.4.1994.

House Tax

Section -171(1) of the Tamil Nadu Panchayats Act, 1994 empowers the Village
Panchayat to levy the house tax in the Panchayat village. Section-172(1) of the Act,
prescribes the Village Panchayats to levy of house tax either on the basis in which such tax
was levied in the local area concerned immediately before the commencement of the Act or
on the basis of classified plinth area at the rates as specified below. Section-172(4) of the
Act, enable the Government, to prescribe the rules for assessment and collection of House
Tax in respect of Village Panchayats.

Rates of Taxation:

As per Schedule-I of the Act enclosed.

Revision Petition against assessment:

As per Rule-12 of the Tamil Nadu Panchayats (Assessment and Collection of Taxes)
Rules, 1999, any person may at any time not being less than thirty days or more than sixty
days before the end of half-year or year, move the executive authority by a revision petition
to reduce the tax. Immediately after the receipt of the revision petition, the executive
authority shall pass final orders on such revision petition within two months of its receipt and
shall inform the petitioner in writing and shall direct him to pay the amount fixed on revision
within fifteen days.

Appeal :

An appeal against the orders of the executive authority on the revision petition under
Rule-13 shall appeal to the Village Panchayats within fifteen days after the receipt of
demand notice or an order under Rule-13. The Village Panchayats have the power to
cancel or modify the orders of the executive authority. Any person who is aggrieved by the
decision of the Village Panchayat may prefer a petition of revision within thirty days after
receipt of orders of the Village Panchayat to the Inspector. The Inspector shall pass orders
on such revision petition on the merits of the claims within a reasonable time and such
orders of the Inspector shall be final.

Collection of House Tax - Village Panchayats

 42

Year Amount
(Rs. in lakhs)
1997-98 1423.30
1998-99 2007.00
1999-2000 2550.19
2000-2001 3078.06
2001-2002 3408.37
2002-2003 3161.98

General :

Village Panchayats:

The Second State Finance Commission has recommended as follows:

a) House Tax Levy should be either on plinth area basis or plinth area related
rental value. In the next revision, switching over to the plinth area
method under the present Act may be effected through suitable
amendment to the Act.

Plinth area rate as prescribed in schedule-I under section-172(i) of the Tamil Nadu
Panchayats Act, 1994 may be adopted along with minimum flat rate of tax for those dwelling
in less than 9.29 sq.m. (100 sq.ft.)

b) General revision of house tax may be effected once in five years in respect
of residential properties and once in two years in respect of non-
residential properties.

c) In village adjoining urban belt, at the floor level, house tax rates (on
properties other than huts) need to be 50% of property tax rates of
adjoining urban local body.

The above recommendations are under the consideration of the Government.

 43

1994 TN Act 21
SCHEDULE - I
(See Section 172(1) )
Classification If the tax is levied every half-year If the tax is levied every year
(1) (2) (3)
Minimum rate Maximum rate Minimum rate per Maximum rate
per half-year per half-year year per year
(i) (ii) (iii) (iv)
RsP RsP Rs.P Rs.P Rs.P
(i) Concrete 0.25 per 9.29 0.50 per 9.29 0.50 per 9.29 1.00 per 9.29
house, square square square square
Madras decimetres decimetres decimetres decimetres
terraced of the plinth of the plinth of the plinth of the plinth
houses area area area areas
storeyed
houses
(ii) Tiled houses 0.15 per 9.29 0.30 per 9.29 0.30 per 9.29 0.60 per 9.29
square square square square
decimetres decimetres decimetres decimetres
of the plinth of the plinth of the plinth of the plinth
area area area area
(iii) Thatched 0.10 for every 0.20 for every 0.20 for every 0.40 for every
houses 20 9.29 square 9.29 square 9.29 square 9.29 square
square decimetres decimetres decimetres decimetres
metres and or part there or part or part or part
above of of plinth thereof of thereof of thereof of
area plinth area plinth area plinth area
(iv) Thatched 0.20 for every 0.50 for every 0.40 for every 1.00 for every
houses 9.29 square 9.29 square 9.29 square 9.29 square
below 20 metres or metres or metres or metres or
square part thereof part thereof part thereof part thereof
metres of plinth area plinth area of plinth area of plinth area

Explanation-I. - In respect of buildings which are partly concrete, terraced, tiled or

thatched, the rates applicable to the respective categories as above shall be applicable for
the portions covered by each kind.

provided that in respect of buildings the plinth area of which does not exceed 18.58
square metres and which are fully concrete, terraced or tiled, or partly concrete, terraced or
tiled, house tax shall be levied at a flat rate of rupees twenty per half year.

Explanation-II The use of the building may be classified and surcharge shall be
levied on the levy of house tax at the rates specified below:

Class of usage Rate of surcharge

(i)
Purely residential Village Panchayats Nil

(ii)
Simple commercial like petty Village Panchayats 20%
shops and other small
commercial establishments
(iii)
Largely commercial industrial Village Panchayats 60%
and business establishments,
Cinema theatres, Hostels,
Lodges etc
 44

Provided that in respect of buildings used partly as residential and partly as

commercial , industrial etc purposes the rate of surcharge applicable to the respective
categories as above shall be applicable for the portions covered by each class of usage .

Provided further that Educational institutions (not commercial in nature) exempted

from levy of house tax immediately before the commencement of the Act shall continue to be
exempted under this Act.