1. Old system vs. new system
Previously property tax was calculated using the rate-value system where the payable tax was fixed based on rent collected from a particular property in a year.
However, the system generated low revenue due to the artificially low property charges imposed by the Rent Control Board.
However, the new system adopted by MCGM follows a capital value system where the tax calculation system depends on the stamp duty Ready Reckoner rate.
This rate is issued by the Government, which helps to evaluate the property value based on various parameters.
MCGM revises this rate annually to fix a realistic value. MCGM is the richest municipal corporation in India, whose annual budget is more than the yearly budget of some of the smaller states in the country.
Now that the taxpayers know about the new property taxation system, they must know the MCGM property tax calculation process as well.
2. Calculation process
The MCGM property tax calculation or evaluation depends on several parameters such as property location, property type-residential, commercial or land, classes of amenities provided, construction age, construction type-multi-story, single floor or kutcha house, property occupation status, carpet area, and Floor Space Index (FSI).
Assessing all these factors, civic bodies devise a formula to calculate the tax liability of Mumbaikars.
Here is the formula for calculating MCGM property tax.
Property tax = Tax rate X Capital value
- Property tax is a certain percentage of the capital value.
- Capital value depends on the base value.
Capital Value = Rate of the base value/ Market value of the property (based on the Ready Reckoner) x Built-up area x Age factor x Type of building X Category of use X Floor factor.
There are different weights assigned for various factors like construction type, age of the building, and user category.
Read the chart provided below to know about the weights of the respective parameters.
Weights for construction type in units:
- Bungalows and RCC construction -1 Unit.
- Structures apart from RCC (such as semi-parameters, chawls) - 0.60 units.
- Under construction or vacant land - 0.50 units.
Weights for property age in units:
- Properties constructed before 1945 - 0.80 units.
- Properties constructed between 1945 and 1985 - 0.90 units.
- Properties constructed after 1985- 1 unit.
Weights for user category in units:
- Hotels and alike establishments - 4 units.
- Commercial properties (e.g. shops and offices)-3 units.
- Industries and factories - 2 units.
- Residential units and charitable institutions – 1 unit.
(The weights mentioned above are subject to change (without prior notice) as per the BMC/MCGM website).
Hence, before calculating the MCGM property tax manually, one must check the website thoroughly. Also, taxpayers can calculate the property tax in Mumbai through the online calculator available in the MCGM online portal.
As stated earlier, the base value or market value of the property depends on the Ready Reckoner which is used to calculate the stamp duty by the revenue department.
Ready Reckoner calculates the base value by using the area rates issued by the Maharashtra Government in the Annual Statement Rates (ASR).
After discussing the MCGM property tax calculation process in detail, we will focus on the payment process of property tax in Mumbai.