VACANT LAND TAX

Table of Contents

1. Introduction.
2. Act provisions.
3. Rules with respect to VLT.
4. Government Orders.
5. Stakeholders and Overlapping issues.
6. Objective of levy of VLT.
7. Basis of Tax.
8. Rate of Tax.
9. Issues with regard to VLT
a) Identification of Vacant Lands.
b) Identification of Owners of Vacant Lands.
c) Rationalisation of VLT.
10. Reforms proposed and implementation approach.
11. Expected revenue accruals to ULBs.

1. Introduction:-

When agricultural land in urban areas is converted for non-agricultural purposes, tax shall be
levied on vacant sites so that the owner cannot keep them vacant, but carry out constructions in the
site. If constructions are made on the vacant sites, the land in the urban areas will be utilized for several
purposes and the infrastructure facilities provided by the Municipality in the area like water supply,
drainage, roads, and street lighting shall be fully utilized and it will also accrue income to ULB in the form
of Property Tax. If the land is kept vacant without any constructions, the ULB will not get any return on
infrastructure investments made in that area. It is an important source of revenue to the ULB but not
fully tapped due to non-availability of extents of vacant lands and particulars of owners of such lands
with the ULB. The extent of vacant lands in the urban area may be collected through modern techniques
of remote sensing and the ownership of such lands shall be accessed online from the Registration and
Stamp Department to overcome these problems.

Vacant lands thus means lands in the Urban Local Body area not utilized for agricultural
purposes. It also means land in excess of the two-thirds built-up area subject to a maximum of
1,000sq.mts.

2. Act Provisions:-

Section 85 (3) of the Andhra Pradesh Municipalities Act, 1965 provides that save as otherwise
provided in clause (b), the Council shall in the case of lands which are not used exclusively for
agricultural purposes and are not occupied by or adjacent and appurtenant to building levy these taxes
(Property Tax), at such percentages of the capital value of the lands or at such rates with reference to
the extent of the lands as may be fixed by the Council. The proviso thereunder provides that such
percentages or rates shall not exceed the maxima, if any fixed by the Government and the capital value
of such lands shall be determined in such manner as may be prescribed. Clause (b) deals with railway
lands. Section 87 deals with method of assessment of Property Tax. The explanation under sub-section
(4) provides that for the purpose of this Section, an area not exceeding 3 times the plinth area of the
building including its sites or vacant land to the extent of 1,000 sq.mts, whichever is less shall be
deemed to be adjacent premises occupied as an appurtenant to the building and assessed to tax in
accordance with the provisions of the section, and the area, if any, in excess of the said limit shall be
deemed to be land not occupied by or adjacent and appurtenant to such building and the tax shall be
levied thereon in accordance with the provisions of sub-section (3) of Section 85 as if it were land to
which that sub-section applied.

Sub-section (3) of Section 199 of Greater Hyderabad Municipal Corporation Act, 1955 provides
that the Corporation shall in the case of lands which are not used exclusively for agricultural purposes
and are not occupied by, or adjacent and appurtenant to building, levy the taxes specified in sub-section
(1), at half percent (0.50%) of the estimated capital value of the lands, which shall be determined in such
manner as may be prescribed. Section 212 provides for determination of annual rental value of lands
and buildings and sub-section (2) provides that any vacant land not exceeding 3 times the plinth area of
the building including its site or a vacant land to the extent of 1,000 sq.mts, whichever is less shall be
deemed to be adjacent premises occupied as an appurtenant to the building and assessed to tax in
accordance with the provisions of the section and the area, if any, in excess of the said limit shall be
deemed to be land not occupied by or adjacent and appurtenant to such building and the tax shall be
levied thereon at 0.50% of the estimated capital value of the land.

3. Rules with respect to VLT:-

Rule 8 of the Assessment of Taxes Rules, 1990 provides that in the case of lands which are not
used exclusively for agricultural purposes and are not occupied by or adjacent or appurtenant to
building, the capital value of the lands fixed by the Registration Department for the purpose of
registration shall be adopted, in case, the vacant land is purchased at a higher price than the market
value fixed by the Registration Department, the value mentioned in the Registered Document shall be
adopted for fixation of the capital value of the vacant land. Rule 9(1) provides that the property tax on
land which is not exclusively used for agricultural purposes and is not occupied or adjacent and
appurtenant to building shall be levied at 0.20% of the capital value of the land (i.e., the market value as
fixed by the Stamps and Registration Department for purpose of registration).

4. Government Orders:-

In Memo No. 15114/ M1/ 2013 Municipal Administration and Urban Development Department,
dated 15.02.2014, Government instructed to collect Vacant Land Tax for one year at the time of issue of
building permission.

5. Stakeholders and Overlapping issues:-

The Stakeholders of Vacant Land Tax are Urban Local Bodies. The Council fixes the rates subject
to a maximum laid down by the Government. The Urban Development Authorities will not collect this
tax.

6. Objective of levy of VLT:-

Under Section 4 of the Andhra Pradesh Agricultural Land (Conversion for non-agricultural
purposes) Act, 2006 provides that every owner or occupier of agricultural land shall have to pay a
conversion fee for non-agricultural purposes, at the rate of 10% of the basic value of the land in areas as
may be notified by the Government from time to time.

Section 184(1) of the Andhra Pradesh Municipalities Act, 1965 provides that the owner of any
agricultural land who intends to utilize or sell such land for building purposes shall pay to the Council
such conversion fee as may be fixed by the Council not being less than 25 paisa and not more than one
rupee per sq.mt. Provided that no such conversion fee shall be payable where an agricultural land
belonging to charitable, religious or such other institutions as may be prescribed is intended to be
utilized or sold for building purposes.

Section 27(1) of the Andhra Pradesh Urban Areas (Development) Act, 1975 provides that subject
to the provisions of this Act and the rules made there under, the authority shall levy charges, hereinafter
called the development charges on the institution of use or change of use of land or building or
development of any land or building for which permission is required under this Act in the whole area or
any part of the development area within the maximum rates specified in Section 28.

Section 85(3) of the Andhra Pradesh Municipalities Act provides that the Council shall in the
case of lands which are not used exclusively for agricultural purposes and are not occupied by adjacent
and appurtenant to building levy these taxes (Property taxes) at such percentages of the capital value of
the lands or at such rates with reference to the extent of the lands as may be fixed by the Council.

When agricultural land is converted for non-agricultural purposes, conversion fee of 10% of the
capital value of the land has to be paid to the Revenue Department. When agricultural land is proposed
to be used for building purposes, conversion fee of one rupee per sq.mt has to be paid to the
Municipality. Development fee has to be paid to the Urban Development Authority for the purpose of
institution of use of vacant land to any other purpose. Besides conversion fee payable to the Revenue
Department and Municipality/ Urban Development Authority, Vacant Land Tax shall be payable to the
Municipality or Corporation for keeping the land vacant without carrying any construction.

The object of levy of Vacant Land Tax is to discourage the owners to keep the land vacant in the
Urban Areas and to prevent hoarding. It is also a source of income to the Urban Local Bodies.

7. Basis of Tax:-

The capital value of lands fixed by the Registration Department for the purpose of registration
shall be adopted as capital value for the lands for levy of Vacant Land Tax.

8. Rate of Tax:-

Tax on vacant lands shall be levied at 0.50% and 0.20% of the capital value of the land (i.e., the
market value as fixed by the Stamps and Registration Department for purpose of registration) in the
case of Corporations and Municipalities respectively.

9. Issues with regard to VLT:-

a) Identification of Vacant Lands.

b) Obtaining particulars of Owners of Vacant Lands.
c) Rationalisation of VLT in the case of large extent of lands.
d) Levy of VLT in merged areas.
 At present the extent of vacant land is being collected by the Town Planning Staff by conducting
field survey. Due to manual survey, it is not practicable to get the total extent of the vacant lands in the
Urban Area. The Municipal Staff are not able to collect the ownership details of the vacant lands. The
assessment registers are not properly maintained and demand notices are not issued in time. The
collection of tax is also very low. Due to increase of market value, the owners of large extent of lands are
avoiding payment of tax. In the merged areas the rate of tax shall be reduced for better compliance of
payment of tax.

10. Reforms proposed and implementation approach:-

a) Identification of vacant lands:-

(i) The extent of vacant land in the urban areas may be collected through Geographical
Information System (G.I.S).

(ii) The owners of the vacant lands may also be required to file returns of the land held
by them.

(iii) The conducting of field survey may be entrusted to an agency to gather information
of all vacant lands.

(iv) The details of the lands registered in the urban areas may be obtained from the
Registration and Stamps Department.

(v) The list of vacant lands shall be computerized.

(vi) The Assessment of VLT shall be linked with Aadhaar Number and PAN of the owner
of the property by the ULB so as to effectively monitor tax payment.

b) Obtaining particulars of ownership:-

(i) Encumbrance certificates shall be obtained from the Registration and Stamp
Department to know the owners of the vacant land.

(ii) In respect of approved layouts, the details may be collected from the Layout
Developers, Housing Societies and Residents Welfare Associations.

(iii) By publication in the local newspapers in respect of lands proposed to be assessed

to VLT with deterrent action of sale and attachment of land for recovery of tax dues
in case the owners are not forthcoming to pay tax.

c) Rationalisation of VLT:-

(i) Vacant lands measuring 2,000 – 4,000sq.mts shall be taxed at 0.1% (Rs. 100 per lakh)
in Corporations and at 0.05% (Rs. 50 per lakh) in the case of Municipalities.

(ii) Vacant lands above 4,000sq.mts shall be taxed at 0.025% (Rs. 25 per lakh) in the case
of Corporations and at 0.01% (Rs. 10 per lakh) in Municipalities.

(iii) In the areas where the Municipality has not provided infrastructure facilities like
water, drains, roads and street lights, the levy of VLT may be exempted, since the
Municipality had not made any investments in the area.
 (iv) The VLT collectable shall not in any case exceed the property tax that may have been
accrued to the ULB by virtue of levying the property tax for the maximum
permissible built-up area in the site from the date of its conversion of the same
from agricultural to non-agricultural purpose.

d) Levy of VLT in merged areas:-

The prevailing rates of VLT in the erstwhile Municipality may be continued for a
specific period of time until the area is developed.

11. Expected revenue accruals to ULBs:-

a) If the total extent of vacant lands in the urban area is brought into tax net there will be atleast
20% increase in the revenue of the VLT.

b) The arrears of VLT may be collected for a period of 3 years by correcting the assessment
records as per Section 91-A of the Andhra Pradesh Municipalities Act, 1965 instead of one
year as instructed by the Government without giving any discretion to the tax collecting
officers.

c) All such accruals before 3 years and reflected in the books of accounts of ULBs may be
subjected to write-off provisions as per accounting practices.