Civic bodies have long used property tax amnesty schemes as short-term remedies to encourage taxpayers to settle outstanding liabilities. By offering partial or complete waivers on interest and penalties, tax amnesty programs emerged as a solution to address tax evasion and improve compliance, especially in the wake of economic crises. While such initiatives can temporarily relieve stretched urban municipal budgets, repeated amnesty measures risk fostering a non-compliance culture undermining the tax systems they aim to salvage.

In India, the central government’s reliance on tax amnesty measures can be traced back to early efforts like the Voluntary Disclosure Scheme of 1951 and recent initiatives such as the GST Amnesty Scheme of 2024.  Over the years, numerous municipal bodies have adopted similar strategies to encourage taxpayer participation and alleviate the financial burdens associated with unpaid taxes. However, the fundamental question persists – do tax amnesty programs provide a long-term, sustainable solution to the recurring challenge of tax compliance?

Recently, the Municipal Corporation of Delhi announced a House Tax Amnesty Scheme [1], through which taxpayers can obtain a waiver for the 15 years (2004-2019) of due arrear taxes and penalties. Taxpayers must only pay the principal outstanding for the current year and the past five years. A similar initiative [2] by the South Delhi Municipal Corporation (SDMC) in 2017 could recover three times more taxes with a 2.5 times increase in the number of taxpayers.

But the pattern is far from consistent. The Pune Municipal Corporation (PMC) recently acknowledged [3] that more than one lakh taxpayers who benefited from amnesty schemes earlier have defaulted again. Similarly, despite the launch of the “Abhay Yojana” amnesty scheme[4] of Navi Mumbai Municipal Corporation (NMMC), property tax defaulters[5] have persisted, prompting the introduction of yet another [6] amnesty scheme in April this year. The amnesty scheme of the Nagpur Municipal Corporation (NMC) in 2017 [7] also failed to recover due property taxes. Even in Delhi, after a temporary spike in collections – Rs. 2417 crore following the 2022 scheme – revenues declined again in subsequent years.

Although tax amnesty is typically marketed as a one-time opportunity to come clean, its frequent repetition encourages strategic defaulters.  Taxpayers begin to anticipate future leniency. Moreover, after experiencing a successful tax amnesty, taxpayers may also revise their beliefs about the tax authorities’ ability to detect evasion. The financial gain from non-compliance can outweigh the perceived risk of detection and potential penalties.

The Supreme Court foresaw this behavioural shift in a 1997 ruling prompted by Public Interest Litigation (PIL). The ruling cautioned against the frequent rollout of amnesty schemes like Voluntary Disclosure of Income (VDI), which could erode the sanctity of tax laws. Although not directly related to property tax amnesty, it reflects the broader skepticism toward habitual amnesty as a policy tool.

Despite the often-misplaced appeal of tax amnesties, alternative policy measures have been successfully implemented in various jurisdictions worldwide. As an alternative, civic bodies should target the problem of weak tax compliance, which may arise from inadequate or unclear tax policy, failure to enforce legal obligations, or administrative shortcomings.

Instead of upfront write-offs of tax liabilities, instalment payment agreements for an extended period, under reasonable grounds, can be allowed after proper verification. Also, the implementation of the latest technologies such as AI, Blockchain, etc. can be motivated for proactive detection of tax defaults, and pre-emptive actions can be implemented to improve compliance.

For example, the Mira Bhayandar Municipal Corporation (MBMC) achieved record-breaking tax collections [8] by leveraging digital platforms like its website and mobile app and enforcing strict legal measures, including property seizures and auctions. Panvel Municipal Corporation (PMC) formed a team of 13 recovery squads [9] to initiate direct action for recovery, and also kept its offices open on holidays to achieve better tax collection. They also offered digital services[10] for online correction of property records and payment of taxes. These approaches point to a more sustainable path forward than repeated forgiveness.

Globally, more stringent approaches are gaining traction. According to a OECD report, as a strict measure to deal with deliberate tax defaulters, many civic bodies in Ireland and the United Kingdom publish the names and details of individuals and corporations for tax evasion.

[1] – https://timesofindia.indiatimes.com/city/delhi/clean-bill-of-relief-mcds-house-tax-amnesty-scheme-to-waive-arrears-and-boost-revenue/articleshow/121301465.cms#:~:text=The%20last%20amnesty%20scheme%20in,2%2C137%20crore%20in%202023%2D24.
[2] – https://www.thehindu.com/news/cities/Delhi/amnesty-scheme-boosts-sdmc-property-tax-coffers/article17390012.ece
[3] – https://www.hindustantimes.com/cities/pune-news/pmc-urged-not-to-introduce-new-amnesty-scheme-when-property-tax-defaulters-misusing-old-one-101740508683827.html
[4] – https://www.newsband.in/article_detail/nmmc-launches-amnesty-scheme-for-property-tax-recovery
[5] – https://www.newsband.in/article_detail/nmmc-issues-notices-to-454-property-tax-defaulters#:~:text=NMMC%20had%20also%20introduced%20a,with%20the%20reduced%20penalty%20amount[6] – https://economictimes.indiatimes.com/industry/services/property-/-cstruction/maharashtra-cabinet-approves-amnesty-scheme-for-property-tax-arrears/articleshow/120315550.cms?from=mdr
[7] – https://www.nagpurtoday.in/abhay-yojana-2017-turns-out-to-be-a-monumental-failure-as-nmc-garners-only-rs-2363-crore/04011815
[8] – https://www.newsband.in/article_detail/mbmcs-property-tax-revenue-soars-to-rs24159-crore
[9] – https://www.newsband.in/article_detail/pmcrecordshighesttaxcollection
[10] – https://www.newsband.in/article_detail/pmccollects-over-rs341-crore-in-propertytax