The Pune Municipal Corporation has decided to roll out a time-bound relief for property tax defaulters with dues of less than Rs 50 lakhs
Estimating a revenue of about Rs 1,000 crores, the Pune Municipal Corporation (PMC) had given its approval to an amnesty scheme for property tax defaulters. This time-bound scheme is applicable to those who have property tax dues of less than Rs 50 lakhs. Initially planned for a period between October 2 and November 30, 2020, the scheme has been extended till January 26, 2021.
The amnesty scheme comes after the Maharashtra government’s recent move, to reduce the stamp duty on sale deed documents by 3% from September 1, 2020, to December 31, 2020, and by 2% from January 1, 2021, to March 31, 2021. The stamp duty rate prior to this was 5% for urban areas and 4% for rural. Soon after this, the ready reckoner (RR) rate was hiked, almost invalidating the effect of stamp duty reduction.
Year after year, the PMC rolls out attractive amnesty schemes, just like most other civic bodies across India. While it does help to an extent, the conflict between policies encouraging home-ownership and those that add to the number of fence-sitters seems to go on year after year. In the intervening time, homeowners get property tax amnesty schemes, which is ‘not ideal’, says Sakshi Vasudeva, a Pune-based homeowner. “We pay our property tax on time, every year. While there may be many circumstances that deter homeowners from paying their property tax, an 80% penalty waiver is not encouraging for those who have always paid it on time.” Here’s all that you need to know about the amnesty scheme introduced by the PMC in the wake of the Coronavirus pandemic.
Property tax defaults on the rise in Pune
PMC standing committee chairman Hemant Raine said that it was necessary to give some relief to the homeowners, given that many of them found it difficult to withstand problems caused by floods in 2019 and the COVID-19 pandemic in 2020. So far, property tax dues from 5,34,410 properties were pending and while the actual tax amount stood at Rs 2,117.42 crores, the penalty amount on it was Rs 2,468.66 crores. This is because the corporation charges a 2% compound interest every month, on unpaid property tax dues.
How will the amnesty scheme help Pune homeowners?
If the existing penalty was to be applied, the penalty amount would be higher than the actual tax. As a result, the standing committee of the PMC has allowed 80% relief on the penalty amount, to those paying their dues between October 2, 2020, and November 30, 2020. Those paying the dues after November 30, will get a rebate of 75% on the penalty amount. Starting January until the 26th, the rebate will be reduced to 70% of the penalty. Only those with dues of less than Rs 50 lakhs are eligible for the amnesty scheme. Owners of all properties – residential, commercial, and educational – can benefit from this scheme.
The civic body has formed a special recovery team of 61 people, to implement the scheme. About 3.5 lakh properties are under their radar. Notices have been issued to defaulters and the special team will, in days to come, follow up with them and may even make visits, if required.
While the PMC expects to recover dues, it is still far from assessing over four lakh properties, as also their GIS mapping. Once this is done, more properties would be under the fold of the PMC resulting in added revenue for the civic body. Extending amnesty schemes, some allege, gives out mixed signals. Do note that this is not the first time that the PMC has announced an amnesty scheme. It did so in 2016 and 2018 too and even for other dues towards the local body and octroi, among others.
Although the PMC had maintained that the scheme will not be extended beyond November 30, 2020, the extension in date has been announced given that the corporation received a positive response and could collect Rs 350 crores in the first phase that ended on November 30, 2020.
Taxes on property ownership in Pune
The RR hike in Maharashtra was on an average of 1.74%, the highest being in Pune at 2.79%. Analysts say that the hike has been ‘unscientific’, especially in the case of Pune which has been affected and is looking for housing revival over the next few months.
Percentage increase in RR rates
There was no rate revision in 2018-19 and 2019-20.
How the RR rate hike will impact real estate
Anuj Khetan, director, Vijay Khetan Group, remarks, “It is being perceived that the ready reckoner rates have been increased in the state. However, in reality, in the government’s view, they have rationalized the rates across the city. Nonetheless, it is not the right time to do this exercise when the industry’s balance sheet is under severe stress and the country is reeling under this horrific pandemic.” Bhushan Nemlekar, director, Sumit Woods Limited, adds: “We are hoping that the BMC will reduce the premium percentage so as to give relief to the real estate industry.”