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Chandigarh property owners may face a significant tax hike from FY 2025-26 as the UT administration finalizes plans to align rates with major Indian cities. Currently taxed at 3% of annual ratable value (ARV), the proposed increase could push rates closer to Delhi and Mumbai. The Municipal Corporation had suggested raising residential tax to 12% and commercial to 15%, but the proposal was rejected by councilors. Despite opposition, the UT administration holds the final decision. If approved, the hike will follow an annual escalation model, affecting both residential and commercial property owners.
Chandigarh residents should prepare for an increase in property taxes for both residential and commercial properties starting from the financial year 2025-2026. The Union Territory (UT) administration is in the final stages of deciding on this hike, aiming to align the city's tax rates with those of neighboring regions and other major Indian cities. Advertisement
Currently, Chandigarh calculates property tax at 3% of the annual ratable value (ARV). This rate is notably lower compared to other cities. For instance, Mumbai imposes a 12% tax on residential properties and 20% on commercial ones. Delhi's rates vary between 6% and 20% for residential and 12% to 24% for commercial properties. Bengaluru charges 20% for residential and 25% for commercial properties.
A special committee led by the UT finance secretary has reviewed Chandigarh's current property tax structure and found it inadequate. The committee suggests a substantial increase, potentially doubling the existing rates, to bring them closer to those in other major cities. Senior officials are preparing a detailed report with supporting calculations to justify the proposed hike.
The Municipal Corporation (MC) of Chandigarh has been grappling with financial challenges, including halted development projects and delayed staff salaries. To address this fiscal crisis, the MC proposed increasing the property tax rate from 3% to 12% across all property categories. Additionally, they suggested an annual 1% hike on commercial properties (up to a maximum of 15%) and a 5% annual hike on residential properties.
However, this proposal faced opposition. In a recent Municipal Corporation House meeting, councilors from various parties unanimously rejected the agenda to revise the existing property tax rates. The proposal aimed to increase the tax rate from 3% to 12% across all property categories, along with the aforementioned annual hikes.
Despite the rejection, the MC commissioner registered his dissent, and the documentation has been forwarded to the Chandigarh administration for further evaluation. This move effectively transfers the decision-making authority regarding the tax increase to the UT administration.
The proposed tax increase is intended to be implemented annually, similar to existing hikes in water and garbage collection charges. Previously, the BJP-led MC established an automatic 5% annual increase from April 1 for these services, eliminating the need for general house discussions on future increases.
Comparatively, other Indian cities have also been revising their property tax structures. For instance, the Pune Municipal Corporation (PMC) has set a target of INR 2,847 crore from property tax collection for the 2025-2026 fiscal year. Notably, no hike in property tax was proposed, but the civic budget has set a target of INR 2,899 crore from building permissions, indicating a shift in revenue generation strategies. ?
In Chandigarh, the administration has proposed a significant increase in collector rates across various property categories. Specifically, a nearly fourfold (400%) increase is proposed for residential areas in villages, a 130% hike for properties in Sectors 1 to 12, a 96% increase in Sectors 14 to 37, and an 80% rise in Sector 38 and beyond. The collector rate is the minimum property value below which a property cannot be registered with the government, and stamp duty is calculated based on this rate. ?
The Chandigarh administration is now tasked with making a final decision on the property tax hike. Residents and property owners are advised to stay informed about these developments, as the proposed changes could significantly impact their financial planning for the upcoming fiscal year.
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