Published Mar 29, 2026 | 12:34 PM ⚊ Updated Mar 29, 2026 | 12:34 PM
Representational image. credit: iStock
Synopsis: Andhra Pradesh has announced a one-time interest waiver scheme to recover property tax arrears, offering a 50% cut on accumulated interest if dues are cleared in full by March 31, 2026. With arrears exceeding ₹2,400 crore and penalties nearing ₹3,000 crore, officials expect ₹500–600 crore recovery, though compliance remains uneven across municipalities and corporations.
With arrears in tax dues to municipalities and corporations piling up year after year, the Andhra Pradesh government is struggling to make people tax-compliant.
In fact, it has recently come out with an interest reduction scheme for recovery of accumulated arrears, but the extent to which tax compliance has improved is yet to be known.
Through G.O.Ms.No.58 issued on March 16, 2026, the Municipal Administration and Urban Development (MA&UD) Department announced a 50 percent waiver on accumulated interest on property tax arrears for 2025–26 across all municipalities and municipal corporations.
The concession, however, comes with a strict condition — taxpayers must clear the full principal arrears along with the remaining 50 percent of the interest in a single lump-sum payment on or before March 31, 2026. The government has made it clear that no extension will be granted beyond the deadline.
As the window is very short, it is not yet known how the response from taxpayers is, though it is widely believed to be lukewarm, as the scheme offers only a reduction in interest that has accumulated over a period of time.
The scheme is aimed at reducing the financial burden on property owners while enabling civic bodies to recover long-pending dues and strengthen their finances for the delivery of basic urban services.
The move assumes significance against the backdrop of sluggish overall collections. As of now, total property tax collections across the state stand at approximately Rs 2,215 crore, accounting for about 45 percent of the total demand of Rs 4,904 crore for the financial year. The figures include collections from April 1, 2025, covering both current demand and portions of arrears and penalties.
On an annual basis, the recurring property tax demand across ULBs is estimated at around Rs 2,400 crore. While the state typically records a healthy collection efficiency of 85–90 percent on current-year dues, recovery of arrears continues to be a persistent challenge.
The magnitude of the problem is evident in the outstanding figures. Principal arrears alone stand at around Rs 2,409 crore, while the accumulated interest and penalty component has swelled to nearly Rs 3,000 crore, driven by a monthly interest rate of about 2 percent. It is this large pool of pending dues that the government is attempting to unlock through the interest waiver scheme.
Despite the scheme being in force for nearly two weeks, no official interim figures are available on how the tax collection is progressing. The absence of data is not unusual given the short window of implementation and the tendency of taxpayers to make payments closer to the deadline.
Officials expect the scheme to generate between Rs 500 crore and Rs 600 crore in revenues by the end of the financial year, while effectively waiving nearly Rs 1,500 crore in accumulated interest. Municipal bodies across the state — including major corporations such as Greater Visakhapatnam Municipal Corporation (GVMC), as well as Tirupati and Kadapa — have stepped up efforts to publicise the scheme.
However, the major concern lies in the uneven performance of ULBs. As many as 76 out of 123 municipalities and municipal corporations in the state are lagging behind the growth benchmarks prescribed under the 15th Finance Commission norms. This underperformance not only affects their internal revenues but also has implications for their eligibility to receive performance-linked grants.
While the government has not publicly identified the lagging ULBs, official figures indicate wide disparities in collection efficiency. Statewide performance averages around 45 percent, but individual ULBs show significant variation. Some have achieved collection efficiencies of up to nearly 64 percent, while others are struggling at much lower levels.
In one instance, a major ULB with a demand of around Rs 1,589 crore has managed to collect only about Rs 484 crore, translating to an efficiency of just 30.44 percent — far below the state average. Several others fall in the 39 to 44 percent range, highlighting systemic gaps in both current demand recovery and arrears collection.
At the other end of the spectrum, stronger performers — typically smaller or mid-sized ULBs — have recorded collection efficiencies in the range of 55 to 64 percent, supported by better enforcement and monitoring mechanisms.
GVMC, the state’s largest municipal corporation, has collected over Rs 510 crore so far, surpassing last year’s figures and is expected to touch Rs 600 crore by the end of the month. While it performs well in absolute terms, it too faces challenges in recovering large arrears, particularly from institutional and industrial entities.
Officials attribute the disparities to multiple factors. Lagging ULBs often grapple with high outstanding dues from government departments and large institutions, a significant number of unassessed or under-assessed properties identified through GIS surveys, and weaker enforcement mechanisms.
Statewide, surveys have flagged over 1.07 lakh unassessed properties and another 1.04 lakh under-assessed properties, further impacting revenue potential.
In contrast, better-performing ULBs have leveraged technology-driven monitoring systems, daily dashboards, ward-level reviews, and sustained awareness campaigns to improve collections.
A break-up of the overall tax position underscores the scale of the challenge. Against a total demand of Rs 4,904.12 crore for 2025–26, collections stand at Rs 2,215.38 crore, leaving an outstanding balance of roughly Rs 2,688.74 crore — or about 55 percent of the demand still unpaid. Of this, Rs 2,409 crore constitutes principal arrears accumulated over previous years, while the interest and penalty component is estimated at around Rs 3,000 crore.
Property tax continues to be the single largest source of revenue for municipal bodies, accounting for nearly 70–80 percent of their own-source income. Other components such as water charges, sewerage tax, vacant land tax, and trade licence fees exist but are not separately quantified in the latest consolidated reports.
The government’s immediate focus remains on improving arrear recovery, particularly in the 76 underperforming ULBs, where weak collections have dragged down overall performance. The G.O.Ms.No.58 scheme is being seen as a last-ditch intervention to recoverk stuck revenues and improve municipal balance sheets before the close of the financial year.
