Delhi, Rajasthan, and Tamil Nadu Lead in 5-Year Property Tax Growth

November 20, 2024

Municipal corporations (MCs) are crucial for urban governance, which rely heavily on property taxes for revenue. Recent reports highlight important differences in property tax revenue growth across states in India from FY19 to FY24.

Property Tax Revenue Trends

MCs in states with high GDP saw varying growth rates in property tax revenue. Delhi, Rajasthan, and Tamil Nadu topped the list with 26%, 23%, and 23% annual growth rates, respectively. West Bengal lagged with only 3% growth. Property taxes account for over 16% of total MC revenue in India.

Economic Activities Influencing Revenue

Economic activities impact property tax collections. Tamil Nadu and Andhra Pradesh benefit from Global Capability Centres (GCCs). Tamil Nadu is also a major automobile hub. Rajasthan’s tourism drives its economy, while the National Capital Region (NCR) benefits from government presence, boosting property tax revenues.

Revenue Composition by State

In FY24, property taxes constituted 50% of total revenue for Telangana’s MCs. Karnataka followed with 43%, Andhra Pradesh at 35%, and Tamil Nadu at 27%. Maharashtra, despite being the wealthiest state, derives only 11% of its revenue from property taxes due to its diversified income sources.

Variations in Taxation Methods

States employ different tax rates and collection methods. Tamil Nadu raised property tax rates by 25-100% in April 2022, with a further 6% increase in Chennai in September 2024. Telangana shifted to market value-based calculations for property tax. In contrast, Maharashtra has not changed its rates since FY16.

Strategies for Revenue Enhancement

Experts recommend improving public infrastructure to reduce reliance on government grants. Charging fees for parks, libraries, and healthcare services can generate additional income. Strengthening tax and non-tax revenue collection processes is essential. Other revenue sources include water and electricity taxes, trade licenses, and development charges.

Important Facts for Exams:
GCC – Global Capability Centres have emerged as important contributors to economic growth in Tamil Nadu and Andhra Pradesh. They enhance local job markets and attract investment opportunities.
AMRUT 2.0 – The Atal Mission for Rejuvenation and Urban Transformation 2.0 aims to improve urban infrastructure. It focuses on enhanced property tax collection methods and better municipal services across Indian cities.
NCR – The National Capital Region includes Delhi and surrounding states. It benefits from a strong government presence which boosts property tax revenues and urban development initiatives.

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