Tamil Nadu Rural Areas Set for Overhaul in Property Tax System

A pilot project in 148 village panchayats shows potential revenue boost; the state targets ₹1,000 crore in collections. Property tax administration in rural Tamil Nadu is poised for a significant transformation. Moving away from the long-standing flat rate model, the State has initiated a shift to a plinth area-based assessment system in line with the Tamil Nadu Panchayats Act of 1994.

A pilot initiative was rolled out earlier this month in 148 village panchayats (VPs), where property taxes were calculated based on the built-up area rather than a fixed rate. The experiment revealed promising results each panchayat could gain an estimated ₹1.5 lakh annually, which local bodies can reinvest in essential services.

“There’s no change in tax rates just stricter enforcement of the law,” said a senior official. The Act has always permitted either method, but the flat rate approach has often led to complaints over misuse of discretion by field staff.

With the pilot completed, officials have been directed to issue revised demand notices for all 1.5 crore rural properties using the plinth area method. Properties are now categorized as residential, commercial, or industrial. Residential units are further divided into concrete houses, tiled houses, and thatched huts.

As per the latest circular from the Rural Development and Panchayat Raj Department:

• Concrete houses: ₹0.5–₹1 per sq. ft. annually
  (e.g., 250 sq. ft. house = ₹125–₹250/year)
• Tiled houses: ₹0.3–₹0.6 per sq. ft.
  (e.g., 300 sq. ft. = ₹90–₹180/year)
• Huts (above 20 sq. m): ₹0.2–₹0.4 per sq. ft.;
  (below 20 sq. m): ₹0.4–₹1 per sq. ft.
  (e.g., 500 sq. ft. = ₹100–₹200/year)

Additional surcharges apply: 20% for commercial properties and 60% for industrial.

Officials have also been instructed to bring all unassessed properties under the tax net. If fully implemented, the state expects to boost rural property tax revenue to ₹1,000 crore.