Short of funds, Delhi’s south civic body looks to hike annual property tax

The South Delhi Municipal Corporation (SDMC) on Tuesday proposed a hike in the annual tax levied on residential and commercial categories across the city in a desperate bid to ramp up revenues ahead of the crucial civic elections that are due in April next year.

To be sure, property tax rates proposed by successive commissioners have not been cleared by the elected wing (the councillors) in the past 10 years.

SDMC commissioner Gyanesh Bharti proposed the tax hike in the budget proposals for 2022-23. The budget was advanced this year in view of the upcoming elections, civic officials said, and added that the SDMC wanted to announce the plans for the next financial years before the model code of conduct for the civic polls kicks in. Usually, the three civic bodies present their budget by the second week of December.

Facing a crippling financial crunch, the three civic bodies in Delhi that administer almost an equal area and a range of services as the state government have struggled to implement new projects and even pay salaries to their staff leading to strikes over the last at least five years. In the build-up to the 2022 municipal elections, the BJP, which has been ruling the three civic bodies for the past 15 years, has come under severe attack from the opposition which has blamed the financial mess on the mismanagement and rampant corruption in the civic bodies.

Bharti made it clear on Tuesday that if the tax hikes are not cleared by the SDMC House, it will be “very difficult” to take up any new projects. “Even today, out of whatever revenue we are earning, more than 90% is being used just to pay the salaries of employees, and rest is being spent on essential sanitation work,” the commissioner said.

A senior SDMC official said if the hike in tax rates is approved, it will help increase the revenue by 15%.

When the MCD was trifurcated in 2012, the South DMC was the only three civic bodies that had a surplus. Over the years, as revenue dried up, the civic body reported the first deficit of ₹398 crore in 2019-20. This went up to ₹1,001 crore in 2020-21 budget, the data from SDMC finance department shows.

Bharti said “minor tax increase” is necessary to achieve the goal of enhanced tax collection. He explained that unlike the last year, this time there will only be two property tax slabs of 12% and 14%. He said properties under categories A such as Sundar Nagar and Vasant , B (Greater Kailash and Defence Colony), D (Janakpuri, Rajouri Garden and E (Paharganj and Pandav Nagar)are proposed to pay tax at the rate of 14%, and the remaining categories of F and G will be taxed at the rate of 12%.

Currently, there are three slabs of property tax. Properties under A-B category pay 12% tax, those under C-E 11% and F-H category 7%. The colonies are categorised from A to G based on state of infrastructure and amenities in the area. The circle rates and unit area value of each category is fixed according to the category, and it forms an important factor in tax calculation.

Among commercial properties, the commissioner has proposed a 5% hike in the tax rates for “special category property” such as guest houses and lodges.

Bharti added that the corporation plans to collect ₹1,445 crore in property taxes in the next financial year.

He has also proposed to reduce the existing rebates on early filing of taxes from 15% to 10%; and for CGHS (co-operative group housing) properties from 20% to 10%. Bharti argued that the 15% rebate on early filing was created when the interest rates in banks were high and the rates have now substantially decreased. He added that CGHS rebate was meant to encourage societies to file taxes collectively but that has never been implemented. The 1% education cess remained unchanged in the budgetary proposals.

The commissioner has also pushed for 20% taxation on commercial properties of Delhi Metro Rail Corporation (DMRC). “The DMRC is currently paying a service charge and several rounds of meeting have been held to resolve the matter. We will charge a normal 20% property tax rate on commercial properties except the operational properties such as station area etc,” Bharti said.

Data from the SDMC finance department shows that the corporation has been running at an annual deficit since fiscal 2019-20. The SDMC had a surplus of ₹663 crore in 2016-17, ₹104crore surplus in 2017-18, and ₹113.63 crore surplus in 2018-19. The deficit of ₹398 crore was registered in 2019-20, and that rose to ₹1001 crore during the pandemic-affected revenue collections of 2020-21.

A municipal official said both the internal revenue from sources have gone down due to the pandemic impact on businesses while the grant from the government has also decreased. “Our buffer surplus funds have been exhausted due to the pandemic and if a third wave strikes, we won’t be able to pay salaries,” the official said, asking not to be named.

Leader of the house Inderjeet Sehrawat said commissioners propose tax hikes every year and just like every year the elected councillors will decline to accept the proposal. “The three categories will continue to exist. The rates will be the same. There will be no hike. We should focus on increasing the number of properties from which tax is collected instead of increasing the rates,” Sehrawat said.

Aam Aadmi Party’s MCD in-charge Durgesh Pathak said the budget lacks vision, and added that the AAP will give immediate relief from tax hike as soon as it comes to power in the civic bodies. “The Budget should have presented a vision on how to improve the economic activities in Delhi, specially after the pandemic. The tax rate was never this high before. MCD has failed the people of Delhi in so many areas,” Pathak said.