Saturday Brain Storming Thought (177) 24/06/2023

ANNUAL RATEABLE VALUE (ARV)

A Rateable Value is an estimate of what it would cost to rent a property for a year, on a set valuation date. The property is assumed to be vacant, in reasonable repair, and available to let on the open market.

ARV is a system in which the gross annual rent of the property is fixed by the municipal body and taxes would be levied based on the estimated value

ARV depends upon

1) size of the property
2) location of the property
3) proximity of the property to certain landmarks
4) locality conditions of the premises
5) amenities provided
6) usage
7) construction type
8) Construction year

ARV in Income Tax

ARV in the income tax is the amount for which the space your business occupies will typically rent

The ARV does not necessarily equal the rent actually paid for the space

It is representative of prevailing rents for similar space in the rental market

Norms of property tax as per The Cantonments Act, 2006

Section 68

1) property tax shall be levied on land and building in the cantonment and shall consist of not less than 10% and not more than 30% of the annual relatable value of land and building

2) rent shall be higher for the particular class of trade or business

Framing of preliminary proposals

Section 69

The board shall in the manner prescribed in section 319 publish a notice specifying

1) the tax which is proposed to impose

2) the persons or classes of persons to be made liable and the description of the property or other taxable thing or circumstance in respect of which they are to be made liable

3) the rate at which the tax is to be levied

Objections and disposal thereof

Section 70

1) 30 days from notice publication

2) the board shall take such objection into consideration and pass order thereon by special resolution

Imposition of tax

Section 71

CG may authorize the board to impose the tax in the original form or if any objection has been submitted, in that form or any such modified form as it thinks fit

ARV definition

Section 73

1) 1/20 of the sum obtained by adding the estimated present cost of erecting the building to the estimated value

2) fair letting value, might reasonably be expected to let from year to year

3) the President Cantonment Board may fix the ARV at any less amount which appears to him to be just

Assessment list

Section 75

CEO shall cause an assessment list of all buildings or lands in the cantonment or both, as the case may be as CG may be ruled prescribe

The procedure of calculating the annual value of property

1) A = actual rent received as per agreement between owner and tenant

2) B = Fair Rent
It means how much rental income a similar property in the vicinity can fetch with similar facilities and amenities

3) C = Standard Rent
Rent fixed under the rent control act

4) D = Municipal value
It is similar to the circle rate value

Rental value is fixed by a local municipal corporation or municipal committee

5) Notional rental income from house property can be calculated

6) Z = Higher of B or D ie higher of Fair rent value or municipal value

7) Y = lower of Z or C

The gross annual value of property = higher of expected rent or actual rent received = higher of Y or A

8) Net annual value is gross annual value minus municipal taxes like property tax, sewerage tax, and so on

Property tax on rented and self-occupied properties

ARV depends on actual rent received for rented properties

ARV depends upon the reasonable rent-fetching capacity of premises for self-occupied properties

Property tax – Self Assessment

1) Zone fixing

2) Residential Use

Lease type
Residential House
Parking area
Gotha, store
Open land

3) Construction type

RCC
Load Bearing
Sheet roofing
Temporary

4) property rate
Property area
ARV

5) Commercial use

Lease type
Parking
Open land for business
Playground
School
Hotel, lodge, theatre
Mangal karyalay
Mobile tower
Petrol pump
Poultry farm
Narsary
Mandir
Swimming tank
Stadium
Open land
Hostel

6) Construction type

RCC
Load Bearing
RCC shed
Temporary
Simple Office

7) property rate
Property area
ARV

8)Industrial use

9) Use type
All
Mobile tower

10) construction type

RCC
Load Bearing
Temporary

11) property rates
Property area
ARV

Rules for fixation of residential flats – ARV calculation

PART – I

1) construction year

2) Division/Village

3) Zone

4) Sub Zone

5) Ready Recknor rate per sqm (Residential)

6) base value = Ready Recknor rate

Step – 1

1) convert a square meter built-up area into square meter carpet area

The formula for calculating the annual capital value

Step – 2

1) base value (BV)

2) user category (UC)
Residential
Weightage – 0.50%

3) Nature and type of building (NTB)
RCC – 1%

4) Age factor (AF)

5) Floor factor (FV)

6) Carpet area

Formula used

CV = BV X UC X NTB X AF X FF X CA

Part – 2

Calculation assessment tax

To calculate your assessment tax for residential uses with metered water connection, tax percentage is 0.349%

Assessment tax = ARV X tax percentage

Taxes head

1) general tax – 0.110%

2) water tax benefits tax – 0.069%

3) sewerage benefit tax – 0.043%

4) Municipal education cess – 0.040%

5) state education cess – 0.035%

6) tree cess – 0.002%

7) Street tax – 0.050%

Total tax = 0.349%

Weightage is to be assigned on account of building age

1) 0 to 5 years – 1

2) 5 to 10 years – 0.95

3) 10 to 15 years – 0.90

So on

More than 49 years – 0.50

Municipal Corporation S.A.S. NAGAR

Property tax calculation

Fully exempted categories

1) religious activities, religious ceremonies

2) cremation grounds, burial grounds

3) Gaushalas, stray animal care centers

4) historical and heritage buildings notified by GOVT

5) registered charitable and philanthropic organizations

6) persons living below the poverty line, freedom fighters, corporations, schools and collages aided by GOVT

7) hospital and dispensaries owned by GOVT

8) parking spaces meant for multi storied flats/buildings

9) land used for horticulture and agriculture purposes

Partially exempted categories

1) widows

2) handicapped persons

3) non-GOVT aided education organization – 50% of the tax

Property tax calculation

1) plot area

2) plot rate

4) plot value

5) construction value

6) depreciation

7) property value

8) ARV= 5% of property value

Compiled by

Compiled by:

Er. Avinash Kulkarni
9822011051

Chartered Engineer, Govt Regd Valuer, IBBI Regd Valuer