Tax to be paid on fair value of land

Introducing a further change in the property tax assessment in the State, the Local Self-government Department has decided to make the fair value of the land as the basis for tax calculation.

The earlier system of building tax assessment introduced in the 1980s, based on rental value of the building, was changed after a long time in 2011, when a new method was introduced to calculate the property tax based on plinth area.

But, even after several years of the previous change in 2011, many local bodies in the State are yet to fully shift to the system. Urban local bodies like the Thiruvananthapuram City Corporation managed to complete re-assessment of all buildings in its area only by 2018. With a further change in the assessment method, officials and staff in local bodies have a humongous task before them.

The latest change in tax assessment was necessitated by conditions put forward by the Central Government to allow the State to have additional borrowing of 2% (including 1% unconditional borrowing) of the Gross State Domestic Product (GSDP) for the financial year 2020-21. These borrowings were subject to State level reforms, which includes reforms for ‘strengthening local bodies.’

The property taxes in urban areas are bound to go up after the latest changes. Earlier, the basic tax rates were fixed by the respective local body councils.

Here, the Urban Affairs Department has fixed the basic tax rates for different categories of buildings including residential, commercial, educational, industrial, hospitals, amusement, mobile towers and theatres.

The rate of property tax will be fixed on the basis of fair value for each category of building in accordance with the use of buildings. The annual upward revision in the rate of tax will be 5% or hike in Consumer Index Price, whichever is lower, from the second year onwards.

The earlier tax rates based on plinth area used to vary based on the kind of zones which they are located in, with those in developed areas and buildings which are older having lesser taxes.

However, it is not clear whether such variations in rates will be there under the new tax assessment method. The tax rates now listed are based only on the fair price brackets for each land.

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