# 1. Context

## 1.1 Introduction

Several states<sup>1</sup> in India have put tax incentives and other preferential treatment measures in place, mainly to encourage female property ownership but also in an attempt to improve revenue collections due to improved compliance. This paper attempts to explore whether gender-based tax incentives influence the pattern of property ownership and improve tax compliance.

Property tax revenues in India are very low in comparison not only to developed countries, but also to other emerging economies. An estimate provided by the Ministry of Housing and Urban Affairs (MoHUA) pegs recurrent property tax collections in India to not more than INR 200 billion in 2020 (MoHUA, GoI 2020). The Indian Council for Research on International Economic Relations (ICRIER) reports that property tax collections formed 0.15 percent of India’s GDP in 2017–18.<sup>2</sup> In comparison, in 2020 the average collection from property taxes in Brazil was 2.8 percent of GDP.<sup>3</sup> By collecting even 0.5 percent of GDP in property taxes, India would potentially have an additional INR 600 billion of income for urban local bodies (ULBs).

As urbanization in India burgeons,<sup>4</sup> the need for increased revenues for state and city governments grows as well. Taxes related to property form one of the highest sources of own revenues for state and city governments, leading to concerted efforts to use such taxes to increase revenues. In a policy phenomenon unique to India, as states and city governments seek to increase revenues through property-related taxes, a simultaneous push is being made to offer tax incentives to female property owners. This unique experiment offers an opportunity to study the impact of gender-based tax incentives on property ownership patterns and on tax compliance.

Two types of taxes related to property are covered in this paper. The first is the stamp duty (a property transfer tax), which is levied by state governments on the conveyance or sale deeds of properties. This onetime charge is levied concurrently with the transaction. The second is a recurrent property tax levied periodically, most often annually, by ULBs on properties that lie within their jurisdiction. Appendix 1 provides details on the main taxes related to immovable property in India.

> 1. Assam, Bihar, Delhi, Gujarat, Haryana, Maharashtra, Odisha, Punjab, Uttarakhand, and Uttar Pradesh offer stamp duty discounts.

> 2. India’s GDP in 2017 was US$2,651 billion, and in 2018 it was US$2,701 billion. Source: World Development Indicators, World Bank.

> 3. Source: Government Financial Statistics, IMF; https://data.imf.org/?sk=a0867067-d23c-4ebc-ad23-d3b015045405. 4. While projections vary, some sources estimate that India’s urban population in 2031 will reach 600 million. The UN World Cities Report 2016 projects that the country will have seven mega cities with populations above 10 million. The McKinsey Global Institute report “India’s Urban Awakening: Building Inclusive Cities, Sustaining Economic Growth” forecasts that India’s cities will need an estimated US$1.2 trillion in capital investment to meet projected infrastructure demands. Existing capital expenditure is about seven times below the required levels.

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