Property Tax in J&K [UPSC Notes]

The Jammu and Kashmir administration in 2023 notified rules for the levy of property tax in towns and cities of the Union Territory with the declared intention of making urban local bodies self-reliant in development works. In this article, you can read all about this important development for the IAS exam.

Property Tax in Jammu & Kashmir

The UT government said tax is levied everywhere except J&K, where urban local bodies remain entirely dependent on government funds. Jammu and Srinagar have municipal corporations. There are 19 municipal councils and 57 municipal committees in the UT.

• Tax in the past: Until 2002, the erstwhile state of J&K’s Sales Tax Department levied a tax on landlords’ incomes such as rent in urban areas. 
  • It did not, however, share the proceeds with the city governments.
• Law: The Jammu and Kashmir Urban Immovable Property Tax Rules, 1962, were used to levy this property tax. 
• Survey: The tax was calculated using surveys conducted by the assessing authority every five years. 
  • Individual property owners with a minimum rental income of Rs 500 per month were taxed in 1997, the last year the survey was conducted. 
  • The tax was due every quarter, and late payments were subject to a penalty.

So why did the government stop collecting this tax?

• It was unsustainable because the cost of collecting the tax outweighed the revenue generated.
• Furthermore, the majority of property owners challenged the assessment, and the process was slowed by endless litigation.

Who will pay the tax now, and from when?

• Law: In the exercise of powers under Section 71A of the Jammu and Kashmir Municipal Act, 2000, read with Sections 65(1) and 73(1) of the Act, the UT administration has notified rules for the proposed property tax. 
  • The Union Home Ministry authorised the administration to levy the tax in October 2020.
• Implementation: With effect from April 1, the tax is proposed to be levied on people who own property within the territorial jurisdiction of urban local bodies in J&K. 
• Exemption: According to the administration, houses with less than 1,000 square feet which account for 40% of the total will be exempt. 
  • Almost 80% of the remaining houses will cost less than Rs 600 per year; the administration claims that people in Shimla, Ambala, and Dehradun pay ten times this amount.
• Commercial entity: In addition, nearly 46,000 of the 1.01 lakh shops in urban areas are less than 100 square feet in size. Eighty percent of these stores will pay Rs 600 per year or Rs 50 per month. The remainder will earn up to Rs 700 per year.
  • Approximately 30,000 shops will pay less than Rs 2,000 in annual property tax, with 20,000 paying less than Rs 1,500, a tenth of what shop owners in Shimla, Ambala, and Dehradun pay.

What is the formula for calculating tax?

• Calculation: The property tax will be 5% of the Taxable Annual Value (TAV) in the case of a residential property and 6% of the TAV in the case of a non-residential property.
• Factors: The TAV will be determined by factors such as the type of municipality, the government-notified land value rate, floor, area, usage, age of the property, slab, other usage types, and occupancy.

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