Despite repeated technology-driven reforms, property tax collections of Indian ULBs remain among the lowest globally. Examine the structural constraints and suggest reforms.

Property tax is the main own-source tax of Indian cities. It makes up about 59% of municipal corporations' tax revenue [2], yet it yields only about 0.2% of GDP [1]. Missions like JNNURM and AMRUT brought GIS mapping and e-payment, but collections stayed low. The reason is that the main constraints are structural, not technological.

Structural constraints

• Cities do not control the tax: Under Art. 243X, a city can tax only what state law allows. The CAG found that state governments decide the rates, when they are revised and who gets exemptions [4].
• Outdated property values: Some states never set up a Central Valuation Board, so cities had no guidance for revising assessments [4]. Guidance values often lag market prices [2].
• Incomplete tax register: In most cities only 40–80% of properties are on the register [2]. Digital payment mostly helps people who already pay.
• Too few staff: The CAG linked unpaid demand to a shortage of tax collectors. Only ₹375.87 crore of a ₹554.15 crore demand was collected [4].
• Dependence on grants: Cities' own revenue was just 10.27–13.60% of total funds [4]. Because grants from higher governments dominate, cities lack financial autonomy and have little reason to tax harder [3].
• Political reluctance: The tax arrives as one visible yearly bill, and civic services are poor. Councillors avoid raising it and citizens resist paying.

Reforms

• Valuation: States should set up valuation boards and revise guidance values on a fixed cycle. They should also move to the capital value system, which the RBI found raises more tax than the rental value system [2].
• Local control over rates: Let cities set rates and review exemptions within a band fixed by the state, using Art. 243X.
• Staff: Fill vacant revenue posts, reward collection results and train staff in financial management [1].
• Coverage: Use GIS surveys and link the tax register to property registration and utility records [2].
• Finance Commission conditions: The 15th FC tied grants to floor rates and better collection [5]. The 16th FC should also measure coverage, so cities cannot meet targets just by taxing the same payers harder.
• Fairness and services: Protect low-income owners and set aside part of the revenue for visible ward-level works.

Technology can find a property, but collecting tax on it needs valuation bodies, enough staff and local power over rates. If states empower cities and Finance Commission grants reward results, property tax can fund cities' own needs. That would give real meaning to the 74th Amendment's promise of a financially empowered third tier and advance SDG 11 (sustainable cities).