Kerala's government reduces the tax increase for expensive residences.

The state cabinet has approved the decision of the sixth state finance commission (SFC) to levy a higher rate on houses with a plinth area of over 3000 sq ft . The government has proposed to levy 15% levy on all houses with plinth area greater than 3000 sq ft .

TPURAM: With the state cabinet approving the decision of the sixth state finance commission (SFC) to levy a higher rate on houses with a plinth area of over 3000 sq ft, these houses will now be treated as luxury homes and will be taxable at rates higher than property tax.Although SFC suggested a 50-200% levy based on the building's area (which would be between 3000 and 10,000 sq ft. and those above), the government has reformed the recommendation drastically and proposed to levy 15% levy on all houses with plinth area greater than 3000 sq ft. SFC had proposed these slabs for luxurious houses that were completed after January 14, 2011, and the government updated this timeline and proposed to levy an additional fee on luxury houses constructed after April 1, 2022.For new builds with a plinth area of 278.7 sq m, the Revenue Department has a one-time luxury tax, which starts at Rs 4,000.According to SFC, the one-time tax be paid to local authorities rather than the department, but the LSGD denied this proposal.

In its second report, the SFC cited an inability of local authorities to utilize funds and suggested steps to improve revenue collection.The cabinet approved one of them, i.e., to eliminate waivers.This means that a yearly tax increase will be imposed on residential buildings up to 2,000 sq.ft.These buildings are now exempt from a tax increase, and the decision to limit the tax hike to 25 percent for residential buildings that exceed 2,000 square feet and 100 percent for commercial buildings has also been eliminated.

Regarding the lower slab for tax assessment, the government diluted the state finance commission's initial recommendation.The commission recommended that all homes with or above 30 sq.meters be included in the property tax net, and that property tax for houses with 30 sq.meters to 50 sq.

The cabinet reformed this proposal by adding to the tax slab for houses greater than 50 square meters.It will be seen how municipal authorities respond to an annual property tax hike.And the proposed mandatory tax reform, which has been proposed every five years, has yet to be fully implemented in local authorities.