Property tax in India is applicable as per the income tax act 1961. The tax can be imposed by the central government, state governments as well as local bodies. It is a type of ad valorem tax which is levied on the value of the property. Property tax is imposed in all states and union territories of India, while in J&K, it was yet to be imposed. Property tax rates in India range between 5 to 20% of TAV(Taxable annual value).The J&K administration got permission from the Ministry of Home Affairs (MHA) in Oct. 2020 to impose property taxes in the Union Territory.Since then,the J&K urban and Housing development department has been working on this proposal for the imposition of property tax in the Municipalities and Municipal Councils of the union territory. Their proposal got approved, and it was decided that tax will be imposed from 1st April 2023. This tax will be levied and collected on the properties situated within the Municipal area only.The taxes will be collected under two different heads; the property tax rate on residential property would be 5% of the Taxable Annual Value (TAV), while on Non-Residential Property, it will be charged at 6% of TAV. The rate will be applicable to revision once three years from the date of imposition of tax. The total annual value will be calculated by multiplying the nine different factors related to the characteristics of the property. The government proposes to use the revenue collected from this tax for water and sewer improvements, education, construction of roads and hospitals in Jammu & Kashmir, and alike.
The imposition of tax, although it will increase the revenue collection capacity of the Jammu & Kashmir Government, will have some impacts on the lives of common people. The cost of living in J&K will have an impact. The cost of living is expected to increase via an increase in house rents, business rents, higher prices of goods and services, and so on. For example, if the owner of a building is taxed, he will shift the tax to those people whom he rents his property, be it for living purposes or for the purpose of doing any business. Those businessmen who will be paying high rents will attempt to shift the burden of the taxes to his customers in the form of higher prices of goods and services and also in the form of higher wages in case he is a laborer. We may see a rise in the inflationary tendencies in the UT in the upcoming future. While the immediate impact expectations are in the form of inflation, however, the long-term potential impacts can be seen in the form of a depressed and discouraged business and investment activities in Jammu & Kashmir. How it will have discouraging effects on the business atmosphere can be seen in the background of the economic theories and principles in this study area.
(Author is a Rsearch Scholar of Economics. The views, opinions, facts, assumptions, presumptions and conclusions expressed in this article are those of the authors and aren’t necessarily in accord with the views of “Kashmir Horizon”.)
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