The Chennai Corporation has set the ball rolling towards an increase in property tax rate and company tax for IT buildings in the city.

Speaking at a council meeting on Wednesday, Mayor Saidai S. Duraisamy said the property tax rate for IT parks was on a par with that of small retail shops in the city. “The rental value of such buildings is high and the companies are able to pay hefty amount as salary to their employees. But, the tax rate for such companies was not changed by the previous corporation council,” said Mr. Duraisamy. “We have taken measures to review it.” According to Revenue Department officials, the 175 sq km area of Chennai Corporation's earlier jurisdiction has 12,417 limited and private limited companies. The Revenue Department has now been asked to create a comprehensive database of companies located in the 426 sq km area of the current jurisdiction of the Corporation and identify the exact number of IT companies located in it. The Revenue Department the Chennai Corporation would then create a separate category of property tax assessment for IT companies with a higher tax rate.

At present, for companies with investment of more than Rs.1 lakh, the company tax has been fixed at Rs.100. Any company with an investment of more than Rs.10 lakh pays Rs.1,000, which is the maximum company tax collected by the Chennai Corporation. As part of the measures taken to augment revenue, the civic body is now planning to increase company tax for IT parks, officials said. On the other hand, the property tax ranges from Rs. 3-9 per sq ft.

Former Chief Urban Planner of CMDA S. Santhanam said the rentals of such buildings would increase because of the proposal and would affect smaller players. “Larger players may not be affected. Small companies may find it difficult to run business because of the increase in tax,” he added.

National Association of Software and Services Companies (NASSCOM) Regional Director A. Purushothaman said: “So many IT buildings are vacant. The government should ensure that they support the business rather than taxing them. This will go against promoting Chennai as an IT destination.”

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Aloysius Xavier LopezJune 28, 2012