Presentation on “RATABLE VALUE” - A.B.Patwardhan Director Patwardhan Consultants pvt.Ltd. 1

What is Ratable Value ? - Gross Annual Rent at which the land or building might at the time Assessment reasonably be expected to let from year to year. 2

What is the significance of ratable value and where it is used ? -Ratable is used by Corporations for Assessment of properties. Assessment is done on the % basis of ratable value as fixed by the Corporation under different heads as General tax, Sewerage Tax, Water tax, tree cess, repair cess etc., - It is used for Income Tax purpose. - It is used for Wealth Tax purpose under Rule 1-BB. 3

Working out Ratable Value of property – –If the property is partially rented, then for owner occupied portion proportionate rent is worked out. –If the Standard Rent is fixed in Court of Law, same shall be considered. 4

Annual Letting Value ( A.L.V. ) = Consolidated rent at which property expected to let including including tenant’s taxes Gross Ratable Value ( G.R.V. ) = A.L.V. less tenant’s taxes and less any value of services rendered by the landlord. Ratable Value ( R.V. ) = G.R.V. less 10% Statutory deductions. 5

Tenants’ taxes Are – i) Water tax, water benefit tax, sewerage tax, sewerage benefit tax. ii)State Education Tax shall not be taken into account iii)Rent shall be exclusive of Repair cess. iv) Other taxes as may be prescribed and recoverable from the tenants. 6

If the property is not rented and its ratable value is not available from Corporation / Local body. Then Net Return from the Property as if rented shall be worked out on the basis of current Market Value Find out prevailing Rate of Rental in the locality. Net return from the property can be worked out from its value of acquisition of Land, development cost and building cost incurred. Net return from the property shall be worked out at % of return from the property. Various Court decisions are available directing % of net return from 9% to 7% 7

What is the present Scenario ? To avoid litigations there is tread to let out premises on Leave & License basis for a short / long period; with / without deposit (with interest / without interest ). Properties let out for Commercial purpose to Companies having Capital of Rs.1 Crore and above are exempted from Rent Control act. 8

As per recent amendment in Rent Control Act, landlords are permitted to increase basic Rent by 4% annually. It means that ratable value will be increased by 4% every year if the landlord has taken advantage of the provisions in the Act. In many cases landlord does not furnish required information to the Corporation to fix ratable value of the property. In that case Corporation fixes ratable value as per their norms, which are settled in hearing. 9

There is no transparency in those cases and no notifications / circulars are issued by Corporation regarding rates chargeable in the locality which gives rise for litigations. At present, due to exorbitant rise in Land cost, development cost and construction cost and Developer’s profit etc. If the property is rented, it doesn’t fetch Return at 3 to 4% only. 10

M.C.G.M. have introduced new system of Assessment of properties on Capital Value basis in order to bring co called transparency in Assessment and to get more revenue. This paper is prepared for discussions of valuers attending this seminar because Being a Profitable Revenue Assessment other Corporations / Public Bodies may adopt the said system of Assessment in future. 11

12 THANK YOU