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Introduction
When someone lives in an urban area, may be on rent or as an owner, he has to pay property tax to the relevant Municipal Corporation or Council. Like in Delhi, it is the Municipal Corporation of Delhi (in short MCD) to which you pay your property tax or house tax. A similar tax called land revenue is paid in the case of agricultural land to the revenue authorities like SDM.
Though the aim of the property tax is to gain revenue for the proper functioning of the MCD, many a times it have been seen that there is an unreasonable demand of property tax by MCD authorities that too for a time period spanning 10 to 20 years. It makes the property tax a huge burden as it is nearly impossible to pay such a big amount that too within a short period of time. Hence it is important for every property owner in Delhi to understand the remedies which they can pursue to avoid paying such high property tax.
In this Article we will see as to how the property-owners can protect themselves not only from paying undue property tax but also the ways in which they can approach the Court in cases the MCD attaches their property or threatens to sell it.
So let’s begin.
Brief Facts
In the year 1993 X who was living in Delhi, received a notice from Assessor and Collector of MCD, stating that his house tax/property tax is now increased from Rs.15,000/- to Rs.2,91,000/- and he has to pay this increased amount. But in the said notice MCD stated no reason as to why the property tax is being increased to such a high value while as per Section 126 (which is now repealed) of Delhi Municipal Corporation Act, 1957 (in short DMC Act) MCD have to give reasons for increasing the property tax value of a property.
Having given the brief background of the facts now let us first see what is the procedure for increasing the tax on a property by MCD.
Procedure of Changing the Property Tax by MCD
MCD takes property tax from resident of Delhi for generating income for itself. It is required for its sustenance and the work it provides for the residents. It is very similar to Stamp Duty which Government charges you with, when you buy a property because without revenues neither Government nor MCD can exist.
Before the year 2004 MCD took property tax on the basis of rateable value of the property. Your property was measured on certain parameters and the tax was imposed accordingly. For example let’s say earlier your property was single storey and now you raised 2 more floors then as your property has undergone a change in terms of the construction, MCD will impose more House tax on you.
Let’s take another example. Let’s say you are the owner of an agricultural land which though is not assessed for property tax but comes under Municipal Coroporation Area. So far as agricultural activity is undertaken the Revenue authorities, like SDM or Tehsildar, will be responsible for collecting land revenue from you. But if you use this area for commercial purposes MCD can ask for fresh and enhanced property tax from you. MCD can say that though you have not raised any construction but changed the nature and character of the property, you must pay more property tax.
Unit Area System/Method (UAM)
As explained earlier, MCD used to calculate the property tax on the basis of the rateable value of the property which was criticised for being vague. So, from 1st April, 2004 MCD changed the basis of the calculation of property tax for Delhi residents to Unit Area System/Method. In this model there is a simple formula in which you have to put the relevant values to calculate your property tax. This formula is “Unit Area value per square metre x Unit Area of Property x Age Factor x Use Factor x Structure Factor x Occupancy Factor”.
From time to time Municipal Valuation Committee under Section 116(1) of DMC Act is appointed to see as to how these variables should be changed.
Also, MCD maintains a Municipal Assessment Book too in which it records the value of the property tax paid by a particular person. Any person can visit MCD’s office to see this book without paying any fees. Once the property’s tax paid by a person undergoes a change, his property tax value in this Book is changed.
Procedure MCD must follow before increasing your Property Tax
MCD cannot just increase the value of property tax for you. There is a well laid out procedure for that. First of all MCD have to send you a notice under Section 175 of DMC Act for calculation of property tax of your house or land. Then you have to make a representation before concerned officer of MCD, who is generally called Assessor & Collector, to explain what should be your property tax and you have to give reasons for the same. Now the ball is in MCD’s court and it may or may not take into account the reasons given by you while fixing your property tax. If it frames property tax as per your submission then its all hunky dory but if it does not then you have to pay tax as per the demand of the MCD.
Though the process seems innocuous there are drastic consequences of not responding to this notice. I will divide these consequences in two parts : one for the owner and other for his property.
Consequences For the owner if Property Tax is not paid
If there is a demand of property tax which has been made and you did not pay the same or failed to give reply to this notice then it will be automatically assumed that you are wilfully denying the payment which may entail some serious consequences.
Like under Section 152-A of the DMC Act if a person does not respond to the above said notice or fails to pay property tax a he can be imprisoned for a period of 3 months and up to 7 years if the property tax default is greater than Rs. 10 Lacs and for a period of 1 month and up to 3 years if the property tax default is less than Rs. 10 Lacs. Not only this, with imprisonment the owner has to pay 50% of the property tax to MCD.
Danger to Property or House if Property Tax is not paid
If you do not pay the property tax within the time period given, then MCD can take possession of your property from you under Section 158 of DMC Act. In many cases the property is sealed and the owner is not even allowed enter into the property.
The next step is attachment of the property or house under Section 156 of the DMC Act. Though layman may not fully appreciate the gravity of attachment, a lawyer does. Attachment is just a prelude to sale of the property at a public auction. This is called Distress and Sale of the property. So within months an owner of the property may lose his property.
(…to be continued with this Article)
Parveen Semwal
Advocate, High Court of Delhi and Supreme Court of India