Owners rent out buildings to commercial units, cheat on tax
Jan 03, 2014
Source : The Times of India


CHENNAI: A growing number of residential properties in the city are being used for commercial purposes to evade high property tax resulting in a huge loss to the city corporation. Any shortfall in collection of property tax, the biggest source of revenue for the corporation, impacts infrastructure schemes directly.

Many private schools, nursing homes, restaurants, clothing stores and sweetmeat shops are being run in multi-storeyed residential buildings particularly in areas like Adyar, Thiruvanmiyur, Egmore, Anna Nagar, Teynampet and Kodambakkam but the building owners continue to pay residential property tax, say sources.

According to rough estimates, at least 3 lakh residential buildings in the city are being used for commercial activities. Corporation records show that just 1.26 lakh of the 12.45 lakh properties in the city are registered as commercial establishments.

The rise in the number of commercial buildings in residential areas has increased problems of unauthorized parking and air pollution. Anna Nagar Residents' Welfare Association secretary S Vetrivel said the increase in commercial activity has resulted in severe congestion and pollution in several quiet residential areas. "The civic body should take steps to curb the practice of such conversion of residential properties,' he said.

The reason is not far to seek. For instance, in Anna Nagar East, it is Rs 1.25 per sq ft for residential properties and Rs 6 per sq ft for commercial properties. Property tax rates in Chennai, which have not been hiked since 1998, are the lowest among all metros.

Some traders say a huge demand for commercial space is forcing them to use residential properties. "Even residents are happy as they get more rent from us,' said a trader in Thiruvanmiyur.

Officials say they act against tax evaders based on complaints. T G Vinay, deputy commissioner (revenue and finance) said: "We will soon correlate the revenue department's statistics with that of TNEB connections and also the records of commercial taxes department to detect property tax evaders. Action will be initiated against those renting out residential properties to commercial properties without changing the tax rate slab.'

The corporation had planned to map all properties and houses with a geographic information system (GIS) database but nothing has been done so far. Sources say severe shortage of tax assessors is hampering inspections. "Such violations can be detected only during property tax re-assessments which are conducted only based on complaints,' said a tax assessors.

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