#EconomicSurvey: 'Need For Digitisation To Collect Property Tax More Efficiently'

According to the Economic Survey 2015-16, the property tax structure in India needs to be streamlined and the tax base should be widened. India's tax structure has also been compared to tax rates prevalent worldwide.

India lacks in property tax collection as systematic data on property taxation are sparse, says the Survey. Apart from suggesting the digitalisation of property records, the Survey says property valuation must also be revised on periodic basis. The property tax, says the Survey, is a progressive tax and its collection should be done in line with the aim of sustainable economic development and equitable growth.

India's share of property tax as compared to its gross domestic product (GDP) is quite low when compared to other developing countries. According to the Survey, the share of the property tax as a percentage of the GDP in India in 2015-16 is just 0.8 per cent as compared to OECD average of 1.9 per cent. In the UK, this percentage is as high as four per cent.

Need for tech update

India has been lacking in making the requisite investments in the tax collection machinery. The tax base remains very narrow and needs to be widened so that the burden is equitably shared, says the Survey. Property tax is buoyant and hard to evade as they are imposed on an immovable asset which cannot be hidden from the taxmen's lens. Effective use of technology is required to make the identification of properties easy, says the Survey.

Better partnership

There is a three-tier structure of tax division among Central, state and local-self governments. Property tax contributes a large chunk to urban-local bodies and to state governments' exchequer in the form of stamp duties. So, aligning and adjusting property taxation would require cooperation among all the stakeholders.

The National Land Records Modernisation Programme was launched in 2008. It guaranteed conclusive titles to immovable properties, enhanced transparency and minimised land disputes. Recently, an exhaustive Digital India Land Record Modernisation Programme has been launched to improve upon already existing schemes. Projects like Bhoomi in Karnataka, Bhulekh in Uttar Pradesh and Uttarakhand have been very successful in doing so. Earlier, there was an ambiguity in land records which led to long-pending legal disputes.

On the same lines, a nationwide project needs to be undertaken in the domain of property taxes, says the Survey. Such a programme needs to be undertaken to maintain a digital record of urban properties like houses, restaurant, malls, offices, godowns, etc. The market valuation of properties and the Annual Letting Value (ALV) should also be revised and regularly updated, according to the Survey. This will induce transparency and reduce the cost of collecting property tax. The tax process should be made taxpayer-friendly and they should also have confidence that right amount of taxes are charged from them, says the Survey.

Discretionary power exercised by officials could be curtailed and disputes related to evaluation of taxes would get minimised as a result of proper digitalisation.