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TOPIC NO.3

TAX ON URBAN LAND

BASIS AND PREVAILING RATES OF TAX, IF ANY ON NON-

AGRICULTURAL LAND IN URBAN AREAS IN THE FORM OF
URBAN LAND TAX OR GROUND RENT OR PREMIUM FOR
CONVERSION OF AGRICULTURAL LAND TO NON-AGRICULTURAL
USES.

Basis for Taxation—With a view to augment the resources of the State to carry out
the slum clearance scheme, for housing scheme relating to low income group in the state
and to rationalise the scheme of taxation of land in urban areas put to non-agricultural use
and to secure a return commensurate with the pronounced increase in land values, the
Tamil Nadu Urban Land Tax Act was enacted, which came into force in the City of Chennai
from the 1st July 1963. The Act was struck down by the Madras High Court on two
occasions. The validity of the Act was upheld by the Supreme Court and normal collections
were resumed from 1969 onwards.

2. Land Tax is payable in respect of urban land in lieu of—

(i) The ryotwari assessment.

(ii) The assessment levied under the Madras, Inams (Assessment) Act, 1956
or under the Andhra-Inams (Assessment) Act, 1955.

(iii) The ground rent.

(iv) The quit rent.

(v) Any amount due under the Madras City Land Revenue Act, 1851.

(vi) Such other amount as the Government may by special order, specify,
payable in respect of such land, but shall be in addition to any tax on
such land payable under any other law for the time being in force.

3. The Urban Land Tax Act was extended to the Municipal Towns of Coimbatore,
Salem and Tiruchirappalli and Madurai Cities from 1st July 1971 and was extended to the
belt areas lying within 16 Kilometres from the outer limits of Chennai City from 1st July
1975. It has been extended as per G.O.Ms.No.1465, Revenue dated 25th June 1981 to
Tirunelveli Urban Agglomeration and other peripheral areas of Coimbatore, Salem,
Tiruchirappalli and Madurai so that the areas under both the Tamil Nadu Urban Land Tax
Act, 1966 and Tamil Nadu Urban Land (Ceiling and Regulation) Act, 1978 are co-terminus
with effect from 1st July 1981.

4. The rate of Urban Land Tax was revised with effect from 1st July 1971, 1st July
1972, and 1st July 1975. The Urban Land Tax was assessed on the market value of land as
on 1st July 1963 for the assessment upto 30th June 1975 and on the basis of market value of
land as on 1st July 1971 for assessments from 1st July 1975.
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5. Exemption and concessions granted with effect from 1st July 1972. The following
concessions have been given in the Tamil Nadu Urban Land Tax (Amendment) Act, 1972
(Tamil Nadu Act 19 of 1973) which came in to effect from 1st July 1972:-

(i) Fifty per centum of the amount of Urban Land Tax payable on the urban land was
restricted to the owner occupied buildings.

(ii) Exemption was granted to any urban land owned by any religious, charitable and
philanthropic institutions as specified by the Government by notification.

(iii) No tax will be levied if the aggregate extent of urban land held by a person in any
urban area is two grounds or less.

6. Exemption and concession granted with effect from 1st July 1975, by the Tamil
Nadu Urban Land Tax (Amendment) Act, 1975 (Tamil Nadu Act.49 of 1975), the following
changes and concessions or reductions were made with effect from 1st July 1975.

(i) The concession allowed in respect of owner occupied buildings was withdrawn.

(ii) The crucial date of determination of market value for Madras City has been fixed
as 1st July 1971.

(iii) Exemption from the levy of urban land tax have been given to the following
institutions under section 29 of the Act:-

(a) any urban land owned by the religious institution, which is set apart for public
worship and is actually used, including any urban land owned, by such institution and which
is appurtenant there to, but not vacant land or land in which buildings have been constructed
for remunerative purposes.

(b) any urban land on which hospitals have been constructed and maintained by
private institutions which are in receipt of grant either from the Central Government or from
the State Government and the land appurtenant to it, but not vacant or land on which
buildings have been constructed for remunerative purposes.

(c) any urban land used by schools, colleges or universities, recognised either by the
Government or by any University for purposes directly connected with education, but not
vacant land or the land in which buildings have been constructed for remunerative purposes.

(d) any urban land actually used for religious, charitable or philanthropic purposes by
such institutions as notified by the State Government, but not vacant land or land on which
buildings have been constructed for remunerative purposes.

(e) any urban lands owned by the State or Central Government.

(f) any urban lands used for burial grounds.

(g) any urban lands used for public parks, public libraries, public museum &
orphanages.

No tax will be levied if the aggregate extent of urban land held by a person—

(i) in any urban area other than Chennai City Belt Area, does not exceed
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(a) two grounds, if such urban land is vacant or is used for residential
purposes.

(b) half ground, if such urban land is used for non-residential purposes, or

(ii) in the Chennai City Belt Area does not exceed—

(a) three grounds, if such urban land is vacant or is used for residential
purposes.

(b) one ground, if such urban land is used for non-residential purposes.

7. Exemption and concessions granted with effect from 1st July 1975—In
G.O.Ms.No.1947, Revenue, dated 17th September 1976, the Government have granted
exemptions and concessions by way of reduction of tax in respect of the following
institutions:--

(i) Total exemption from payment of urban land tax to all educational, religious,
charitable and philanthrophic institutions both in respect of vacant lands and lands on which
buildings have been constructed and from which the institutions derive income which is
being used solely for the objectives and purposes of such institutions. This concession will
operate with retrospective effect on and from 1st July 1975, viz., the date on which the Tamil
Nadu Act No.49 of 1975 came into force.

(ii) The urban land tax be reduced by 50 per cent in respect of both vacant lands and
building areas belonging to Community Recreational Centres, Clubs, etc., and this will
operate with retrospective effect on and from 1st July 1975.

(iii) The urban land tax be reduced by 50 per cent in respect of cinema studios both
for vacant land and built up land and this concession will operate with
retrospective effect from 1st July 1975.

(8) Further concessions and exemptions granted with effect from 27th December
1976-- pursuant to a large number of representations from individuals and institutions
against the incidence of Urban Land Tax, consequent on the amendment of the Tamil Nadu
Urban Land Tax Act, 1966 in 1975, the Government after detailed consideration, have taken
decision by way of grant of relief in Urban Land Tax. Accordingly in G.O.Ms.No.2625,
Revenue, dated 27th December 1976, the following orders have been issued.

(i) The distinction introduced by the 1975 amendment Act between lands used for
residential purposes and lands used for non-residential purposes will be given up. In other
words, the separate rate structuring introduced for lands used for non-residential purposes
will be abolished and all urban lands in any given area will be subject to the same rate
structure.

(ii) The market value of land for purpose of assessment to the tax will continue to be
determined as on 1st July 1971. As far as Chennai City is concerned, however, in every case
where revised market value as on 1st July 1971 is more than double the value as on 1st July
1963, the value for purposes of assessment to tax will be limited to double the 1963 value.

(iii) As a result of the 1975 amendment, the first two grounds in Chennai City,
Madurai, Coimbatore, Tiruchirappalli and Salem is exempted from tax. This exemption will
be extended to all holdings in the belt-area irrespective of the total extent. Similarly, in the
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belt-area of Chennai City where the tax was introduced for the first time in 1975, the first
three grounds are exempted. This exemption will be extended to all holdings in the belt-area
irrespective of the total extent.

(iv) The rate of tax on holdings exceeding 10 but not exceeding 20 grounds has
been reduced from 2 per cent to 1.5 per cent and on holdings exceeding 20 grounds from
2.5 per cent to 2 per cent. There is no changes in the other slab rates on land used for
residential purpose in the respective areas.

(v) Where any building is occupied wholly by the owner for residential purposes the
tax payable on the land on which the building is constructed and the urban land appurtenant
to it has been reduced by 50 per cent. For this purpose, it will not be necessary for the
assessee to claim the rebate after the assessment is over. If the return indicates that the
property consists of a house that is wholly owner occupied, and the Assistant Commissioner
is satisfied that this is the factual position, the rebate will be allowed and the claim will be
limited to 50 per cent of the assessment of tax.

(vi) The concessions given in G.O.Ms.No.1947, Revenue, dated 17th September

1976, will now be given with retrospective effect from fasli from which such exemption has
been prayed for by the respective institution provided that there will be no refund of any tax
already collected. The concessions will be granted on specific application to the
Government.

(vii) (a) All institutions recognised as Charitable institutions under the Indian
Income-Tax Act will be dealt with as such for purposes of concessions under the Tamil
Nadu Urban Land Tax Act:

(b) All lands in Chennai City notified as slums under section 3 (1) (b) of the Tamil
Nadu Slum (Improvement and Clearance) Act will be exempted from the tax:

(c) All sabhas where musical, dramatic or other such performances take place,
studios and recreation clubs will be granted a rebate of 50 per cent of the tax to which they
are assessed: and

(d) All Cinema theatres will be granted rebate of 10 per cent of the tax to which they
are assessed.

The Assistant Commissioners have been authorised in G.O.Ms.No.663, Revenue,

dated 16th March 1978 to allow 50 per cent exemption in respect of items (c) and (d) above,
in their assessment orders, without insisting on specific application being made by the
institutions.

9. On the question of levy of Urban Land Tax on holdings which are affected by the
Tamil Nadu Urban Land (Ceiling and Regulation) Act, 1978 the Government ordered that
where any extent of land belonging to a person is declared to be surplus under the Tamil
Nadu Urban Land Ceiling Act and the Government take it over under section 11 (3) of the
Act, the amount of Urban Land Tax already paid and attributable to the extent from fasli
1386 (1976-77) shall be refunded. This has been modified by the Government in
G.O.Ms.No.298, dated 13th February 1980, that the liability to pay the Urban Land Tax
under Tamil Nadu Urban Land Tax Act 1966, will cease only from the date on which the
excess vacant land actually vests with the Government, as specified in the notification under
section 11 (3) of the Tamil Nadu Urban Land (Ceiling and Regulation) Act, 1978 published in
the Tamil Nadu Government Gazette.
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10. The State Government have also decided to grant concession to industries from
Fasli 1385, i.e. 25 per cent rebate in the case of small-scale industries and 10 per cent in
respect of other industries (G.O.Ms.No.2516, Revenue, dated 4th November 1978).

11. The Government in their G.O.Ms.No.1803 Rev. dt.18.8.78, have retained the
powers for the grant of exemption in the following categories and in respect of other
categories specified under section 37 with the Commissioner of Land Reforms to grant
exemption subject to the condition prescribed in the Government Order itself.

(a) small temples, which are not under the control of HR & CE Administration
Department.

(b) cases of Sikh, Jain, Buddhist and Parsi temples except those Jain institutions
which are not under the control of HR & CE Administration Department.

(c) charitable institutions which are either denominational or non denominational.

12. Prevailing rates of taxes, the rates of Urban Land Tax with effect from 1st July
1975 in respect of the holdings both in the City of Chennai and other cities and in the
Chennai City Belt Areas are given separately in Annexures I and II.

13. The provisions of the Act have been extended to 33 villages in Chennai City Belt
Area with effect from Fasli 1396 which were got included within 16 Kilometres from the outer
limits of Chennai City.

14. The provisions of the Act have been extended by Amendment Act, 1991 (Act 1 of
1992) with effect from 1st July 1991 to the 21 Special Grade and Selection Grade
Municipalities namely:- Erode, Pollachi, Thanjavur, Tiruppur, Tuticorin, Vellore,
Uthagamandalam, Dindigul, Karur, Nagercoil, Kumbakonam, Cuddalore, Pudukkottai,
Kancheepuram, Villupuram, Mayiladuthurai, Udumalpet, Palani, Karaikkudi, Rajapalayam,
Namakkal and Two Townships of Mettur and Kodaikanal. The rate of Urban Land Tax was
revised with effect from 1st July 1971, 1st July 1972 and 1st July 1975. The Urban Land Tax
was assessed on the market value of land as on 1st July 1963 for the assessment upto June,
1975 and the basis of market value of land as on 1st July 1975 in respect of Chennai City. In
other areas the rate of tax on the basis of market value as on 1.7.1971. By Tamil Nadu
Urban Land Tax Act 1/1992, the levy of tax was rationalized uniformly on the market value
on the 1st July 1981, in all the urban areas of Chennai, Madurai, Coimbatore, Tiruchirappalli,
Salem and Tirunelveli and new areas of 23 Municipalities. However Government have
directed that in all such cases where the revised Urban Land Tax levied based on the market
value as on 1st July 1981 exceeds 5 times that of the tax already levied based on the market
value as on 1.7.1971, the revised urban land tax shall be limited to 5 times of the existing tax
now levied on the Urban Land as per the market value as on 1st July 1971 vide
G.O.Ms.No.578, Revenue, Dated: 20.5.1992.
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ANNEXURE - I

URBAN LAND TAX WITH EFFECT FROM 1ST JULY 1975 (CHENNAI, COIMBATORE,
SALEM, TIRUCHIRAPPALLI AND MADURAI CITIES).

Extent of lands Rate of Tax

First two grounds Nil

Where the aggregate extent exceeds 0.7 percent of market

2 grounds, but does not exceed Value.
5 grounds

Where the aggregate extent exceeds One percent of market

5 grounds, but does not exceed Value.
10 grounds

Where the aggregate extent exceeds 1.5 percent of market

10 grounds, but does not exceed Value.
20 grounds

Where the aggregate extent exceeds 2 percent of market

20 grounds Value.

ANNEXURE -II

URBAN LAND TAX WITH EFFECT FROM 1ST JULY 1975

(URBAN LAND IN BELT AREA LYING WITHIN 16 KILOMETRES FROM OUTER LIMITS
OF CHENNAI CITY)

Extent of lands Rate of Tax

First three grounds Nil

Where the aggregate extent exceeds 0.7 percent of market

3 grounds but does not exceed Value.
7 grounds.

Where the aggregate extent exceeds One percent of market

7 grounds, but does not exceed Value.
10 grounds

Where the aggregate extent exceeds 1.5 percent of market

10 grounds, but does not exceed Value.
20 grounds

Where the aggregate extent exceeds 2 percent of market

20 grounds Value.