How can Indian cities collect more property taxes to strengthen their finances?

Urban local governments in India have faced many challenges while coping with the Covid-19 pandemic. They need to strengthen their finances to meet the additional responsibility of handling the impact of the pandemic.

Property tax is an important source of their own revenue, and given the fact that a large number of state and local sources of revenues have been subsumed under the Goods and Services Tax, there is a renewed emphasis on property tax.

The Fifteenth Finance Commission in its Report for 2020-’21 states that for urban local bodies to qualify for grants from 2021-22 onwards, states have to notify floor rates for property tax and thereafter show consistent improvement in the collection in tandem with the growth rate of state’s own Gross State Domestic Product.

The Ministry of Finance, as part of the additional borrowing of 2% of Gross State Domestic Product to states for 2020-’21 under the Atmanirbhar Bharat Abhiyan, has also called for states to reform property tax valuation, by linking floor rates to prevailing guidance values/circle rates and putting in a system for periodic revision of property tax rates in line with an increase in price. The Ministry of Housing and Urban Affairs has recently issued a toolkit for property tax...

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