Chapter IX Chapter IX

Taxation and Finance

Local Cess.-

1. (1) There shall be levied and collected in every Panchayat Village, a local cess at the rate of one rupee on every rupee of land revenue payable to the Government in respect of any land in such village.
2. (2) The local cess shall be levied in the Panchayat Village by the Village Panchayat and shall be collected by such agency and in such manner as may be prescribed.
3. (3) Every Village Panchayat shall be paid the net proceeds of the local cess so collected in its area after deducting the cost of collection as may be prescribed.

Local Cess Surcharge.-

1. (1) Every Panchayat Union Council may, by notification, levy a local cess surcharge on all occupied lands in the Panchayat Union area which are for the time being liable to the payment of land revenue to the Government at such rate as may be considered suitable as an addition to the local cess levied under Section 167: Provided that the rate of local cess surcharge so levied shall not exceed five rupees on every rupee of land revenue payable to the Government in respect of any land.
2. (2) The local cess surcharge shall be levied in the Panchayat Union area by the Panchayat Union Council and shall be collected by such agency and in such manner as may be prescribed.
3. (3) The proceeds of the local cess surcharge collected in the Panchayat Union area shall be credited to the Panchayat Union Fund.

Rules regarding collection of Local cess, Local Cess Surcharge and Surcharge on the Duty on transfers of property.— The Government may make rules—

1. (a) for the collection of the Local cess, Local Cess Surcharge and Surcharge on the Duty on transfers of property under this Act;
2. (b) for the apportionment of the proceeds of the Local cess, Local Cess Surcharge and Surcharge on the Duty on transfers of property between the Panchayat Union Council and the Village Panchayat;
3. (c) as to the manner in which, and the person by whom, the accounts relating to the Local cess, Local Cess Surcharge and Surcharge on the Duty on transfers of property shall be kept and inspected.

Land Revenue Assignment.—

1. (1) The Government shall pay to the Panchayat Union Council concerned and the District Panchayat concerned, an annual assignment of such portion of the Land Revenue collected in the State as may be determined by the Government, by notification.
2. (2) The Government may also pay to the Panchayat Union Council concerned and the District Panchayat concerned additional grants as they may deem fit for the purpose of carrying out the functions entrusted to the panchayats under this Act.

Taxes leviable by Village Panchayats.—(1) A Village Panchayat may levy in the Panchayat village—

1. (a) a house-tax;
2. (b) a tax on agricultural land for a specific purpose;
3. (c) a tax on land and buildings (other than agricultural land), save in the areas where the house-tax is levied;
4. (d) a local cess at such rate as may be fixed by the Government;
5. (e) a levy of fees on the commercial crops bought or sold in the Panchayat village, for the purpose of the Village Panchayat;
6. (f) a fee for the registration of cattle brought for sale in any fair or cattle stand.

1. (2) A Village Panchayat may also levy in the Panchayat village such other taxes and fees as may be prescribed.
2. (3) The levy of taxes and fees under sub-sections
3. (1) and
4. (2) shall be subject to such rules as may be prescribed.

House-tax.—(1) The house-tax mentioned in clause

1. (a) of sub-section

1. (1) of Section 171 shall, subject to such rules as may be prescribed, be levied on all houses in the Panchayat village on such of the following systems as the Village Panchayat may adopt, namely:—
   • (a) a system of rates;
   • (b) a classification system; Provided that the house-tax shall be levied on all houses in the Panchayat village on a graduated scale or at a flat rate as the Village Panchayat may decide.
2. (2) The house-tax shall be paid by the owner of the house.
3. (3) The Village Panchayat may, by notification, exempt any house which is used exclusively for charitable purposes or for the purpose of public worship, from the tax.
4. (4) The house-tax shall be paid by the owner or occupier in such manner and within such time as may be prescribed.
5. (5) The Government may make rules—
   • (a) for the regulation of the levy of house-tax;
   • (b) for the revision of the classification of houses;
   • (c) for the assessment of taxes;
   • (d) for the exemption of houses from the tax;
   • (e) for the recovery of taxes.
6. (6) Any person may appeal to the Village Panchayat against the assessment of the house-tax in such manner and within such time as may be prescribed. [***] Omitted by Tamil Nadu Act 29 of 1995

¹⁷³ Omitted by Tamil Nadu Act 29 of 1995

Appeal against assessments.—(1) An appeal shall lie to the Panchayat against any assessment made or against any order passed by the executive authority under any provision of this Act or any rule or bye-law made thereunder, in respect of any tax, fee or other sum due to the Panchayat.

1. (2) Every such appeal shall be preferred by the person concerned within thirty days from the date of receipt of the bill or notice of assessment or the order, as the case may be, and shall be in such form and accompanied by such fee as may be prescribed.
2. (3) The order passed by the Panchayat upon such appeal shall be final: Provided that the appellate authority may, of its own motion or on application, call for and examine the record of any appeal filed under this section to satisfy itself as to the correctness of the order passed and may pass such order as it thinks fit: Provided further that no order shall be passed by the appellate authority under the preceding proviso, which will adversely affect any person unless such person has been given a reasonable opportunity of being heard.
3. (4) The preferring of an appeal under this section shall not, except where the appellate authority otherwise directs, stay the collection of the tax, fee or other sum due to the Panchayat.

Duty on transfer of property.— (1)

1. (a) The duty on transfers of property shall be levied in the form of a surcharge on the duty imposed by the Indian Stamp Act, 1899 (Central Act II of 1899), on every instrument of the description specified below, which relates to immovable property situated within the limits of a Panchayat Village: Provided that no such surcharge shall be levied where the amount or value of the consideration for the sale, or the amount secured by the mortgage, or the value of the property in the case of a gift or exchange or lease in perpetuity, as the case may be, does not exceed one hundred rupees.
2. (b) The surcharge shall be at such percentage, not exceeding five per centum, as the Government may, by notification, from time to time specify, on the amount or value of the consideration for the sale, or the amount secured by the mortgage, or the value of the property in the case of a gift, or the value of the property or the amount secured by the mortgage, as the case may be, as set forth in the instrument.

1. (2) On every instrument of the description specified below, which relates to immovable property situated within the limits of any village panchayat and which is presented for registration under the Indian Stamp Act, 1899 (Central Act II of 1899), the duty on transfers of property shall be charged by the Collector of the district in accordance with the provisions of this Act— Description of instrument
   • (i) Sale of immovable property;
   • (ii) Mortgage with possession of immovable property;
   • (iii) Gift of immovable property;
   • (iv) Exchange of immovable property;
   • (v) Lease in perpetuity of immovable property.
2. (3) The Government may make rules for regulating the collection of the surcharge on the duty on transfers of property, the payment thereof to the Village Panchayat and the deduction of any expenses incurred by the Government in the collection thereof.

Exemption.— The Government may, by notification, exempt any instrument or class of instruments from the surcharge on the duty on transfers of property referred to in Section 175.

Power to require land revenue staff to collect taxes and fees due to Village Panchayats.-

1. (1) Subject to such rules as may be prescribed, the Village Panchayat may require the Village Administrative Officer or such other land revenue staff as the District Collector may specify in this behalf, to collect any tax or fee due to the Village Panchayat on payment of such remuneration as may be determined by the Government.
2. (2) The Village Administrative Officer or such other land revenue staff shall collect such tax or fee and remit the same to the Village Panchayat fund in such manner as may be prescribed.

Write-off of irrecoverable amounts.- Subject to such restrictions and control as may be prescribed, a Village Panchayat, Panchayat Union Council or District Panchayat may write off any tax, fee or other amount due to it, if in its opinion, such tax, fee or amount is irrecoverable.

Local Education Grant –

1. (1) The Government shall pay annually to each Panchayat Union Council a Local Education Grant.
2. (2) The Local Education Grant shall be calculated in such manner as may be prescribed.
3. (3) The Local Education Grant shall be utilized for the promotion of elementary education in such manner as may be prescribed. [***] Omitted by Tamil Nadu Act 30 of 1999

¹⁸⁰ Omitted by Tamil Nadu Act 30 of 1999

Classification of Panchayat Development Blocks.—(1) The Government may, by notification, classify the Panchayat Development Blocks into such grades as may be prescribed, for the purpose of effective administration and for the purpose of providing grants: Provided that the Government may, by notification, alter the classification of any Panchayat Development Block so made.

1. (2) Every such notification shall be laid before the Legislative Assembly as soon as may be after it is published. [***] Omitted by Tamil Nadu Act 30 of 1999 [***] Omitted by Tamil Nadu Act 30 of 1999 [***] Omitted by Tamil Nadu Act 30 of 1999

¹⁸² Omitted by Tamil Nadu Act 30 of 1999

¹⁸³ Omitted by Tamil Nadu Act 30 of 1999

¹⁸⁴ Omitted by Tamil Nadu Act 30 of 1999

Constitution of Panchayat Union Fund and Village Panchayat Fund. —

1. (1) There shall be constituted for every Panchayat Union a fund to be called the Panchayat Union Fund.
2. (2) There shall be constituted for every Village Panchayat a fund to be called the Village Panchayat Fund.

Panchayat Union (General) Fund. — The receipts of the Panchayat Union Council shall be credited to the Panchayat Union (General) Fund and shall be applied to the payment of:—

1. (a) the contributions, if any, owing to the State Government on account of the services of officers and servants lent to the Panchayat Union Council;
2. (b) the salaries and allowances of the officers and servants of the Panchayat Union Council;
3. (c) any amounts falling due on any loans contracted by the Panchayat Union Council;
4. (d) the cost of the construction, repairing and maintenance of such of the public roads and buildings as the Panchayat Union Council is in charge of;
5. (e) the expenses of the Panchayat Union Council in respect of any public meeting or election;
6. (f) any expenses incurred by the Panchayat Union Council in the discharge of duties imposed on it by this Act or by any other law;
7. (g) such sum or sums as may be required to be paid to the Village Panchayat Fund under this Act; and
8. (h) all other expenses duly authorised by the Panchayat Union Council.

Panchayat Union (Education) Fund. —

1. (1) The Panchayat Union Council shall constitute a separate fund to be called the "Panchayat Union (Education) Fund".
2. (2) There shall be credited to the said fund—
   • (a) such portion of the Panchayat Union General Fund as the Government may, from time to time, direct;
   • (b) the Local Education Grant;
   • (c) all contributions received from Village Panchayats or other local authorities for the purpose of education;
   • (d) all income derived from endowments or other property owned or managed by the Panchayat Union Council for the benefit of schools;
   • (e) all fines and penalties levied under this Act or any other law for the time being in force, in respect of offences relating to education;
   • (f) all other sums of money received by the Panchayat Union Council for the purposes of education.
3. (3) The said fund shall be applied for the promotion of education within the jurisdiction of the Panchayat Union Council.

Village Panchayat Fund. —

1. (1) All moneys received by the Village Panchayat shall constitute a fund which shall be called the "Village Panchayat Fund".
2. (2) The Village Panchayat Fund shall be applied subject to the provisions of this Act and general or special orders of the Government, for the purposes of this Act within the limits of the Village Panchayat area.
3. (3) The Village Panchayat Fund shall include—
   • (a) all taxes, cesses, fees and other income of the Village Panchayat;
   • (b) all contributions received from the Government, the Panchayat Union Council, or any other local authority;
   • (c) all sums received as loan or grant from the Government;
   • (d) all income derived from any trust or endowment managed by the Village Panchayat;
   • (e) all fines and penalties imposed under this Act, or any rule, bye-law or regulation made thereunder;
   • (f) all other sums received by the Village Panchayat whether in the course of the performance of its functions or otherwise.

District Panchayat (General) Fund. -

1. (1) Every District Panchayat shall establish and maintain a fund to be called the "District Panchayat (General) Fund".
2. (2) The following shall be credited to the District Panchayat (General) Fund, namely:—
   • (a) the contributions, if any, from the Panchayat Union Councils;
   • (b) the grants made by the Government;
   • (c) the sums transferred to the District Panchayat Fund from the State Consolidated Fund;
   • (d) all sums received as gifts or contributions for works of public utility or endowments made by the Government or local bodies or private individuals;
   • (e) the amounts borrowed by the District Panchayat;
   • (f) all proceeds from the disposal of property by or on behalf of the District Panchayat;
   • (g) all fees and penalties paid to or levied by or on behalf of the District Panchayat under this Act or any other law;
   • (h) all interest, profits and other moneys given by trading investments or other financial operations of the District Panchayat;
     • (i) all other sums received by or on behalf of the District Panchayat.
3. (3) The District Panchayat (General) Fund shall be vested in the District Panchayat.

Application of moneys received and expenditure from funds. -

1. (1) All moneys received by a Panchayat shall be applied subject to the provisions of this Act and for the purposes thereof.
2. (2) The District Panchayat may incur expenditure from the District Panchayat (General) Fund for the purpose of the administration of its affairs and for the purposes provided for in this Act.

Expenditure from Village Panchayat Fund and Panchayat Union Fund.—

1. (1) The purposes to which the Village Panchayat Fund and the Panchayat Union Fund may be applied, include—
   • (a) the construction, repair and maintenance of village roads, drains, bunds and bridges;
   • (b) the lighting of public roads and public places;
   • (c) the construction of public latrines and the arrangements for the cleaning of streets and improvements of sanitary conditions;
   • (d) the maintenance of burial and burning grounds;
   • (e) the supply of water for drinking purposes;
   • (f) the maintenance of common dispensaries, child welfare centres and other health institutions;
   • (g) the opening and maintenance of public markets and cart-stands;
   • (h) the construction of administrative buildings and other buildings for public use;
     • (i) the maintenance of libraries and reading rooms;
   • (j) the implementation of rural development programmes entrusted to the Village Panchayat or Panchayat Union Council, as the case may be;
   • (k) the payment of salaries, allowances, pension and other contributions to the officers and servants employed by the Village Panchayat or Panchayat Union Council;
   • (l) any other measure for the promotion of public health, safety and convenience; and
   • (m) any other public purpose which the Village Panchayat or the Panchayat Union Council may, with the approval of the Government, direct.
2. (2) Every order made under sub-section
3. (1) shall be published in such manner as may be prescribed.
4. (3) The Village Panchayat and the Panchayat Union Council shall set aside annually such sum as may be prescribed for the maintenance of charitable and other institutions and for the balance of the fund to be utilized for such purposes as may be prescribed.

Preparation and sanction of Budgets.—

1. (1) The Executive Authority of the Village Panchayat and the Commissioner of the Panchayat Union Council shall, in each year, prepare and place before the Village Panchayat or the Panchayat Union Council, as the case may be, in such form and within such time as may be prescribed, a budget containing the estimate of income and expenditure for the forthcoming year.
2. (2) The Village Panchayat or the Panchayat Union Council shall, after considering the budget, sanction the same with or without modifications.
3. (3) The budget so sanctioned shall be submitted to the Inspector in the case of Village Panchayat and to the District Panchayat in the case of Panchayat Union Council, for information.
4. (4) If the Village Panchayat or the Panchayat Union Council fails to sanction the budget within the prescribed time, the Executive Authority or the Commissioner shall submit the budget to the Inspector or the District Panchayat, as the case may be, who shall sanction the same with such modifications as he deems fit.
5. (5) The Government may, by rules, provide for the preparation, submission and sanction of supplementary budgets.

Appointment of Auditors. -

1. (1) The Government shall appoint auditors of the accounts of the receipts and expenditure of the funds of the Village Panchayat, Panchayat Union Council and District Panchayat.
2. (2) Auditors appointed under sub-section
3. (1) shall have access to all the books, accounts, vouchers, documents and other materials in the possession, or under the control, of the Village Panchayat, Panchayat Union Council or District Panchayat or the Executive Authority or Commissioner or the Secretary, as the case may be.
4. (3) The Village Panchayat, Panchayat Union Council and District Panchayat shall publish the audit report in such manner as may be prescribed.
5. (4) The audit report shall also contain a statement of any material impropriety or irregularity which may be observed in the accounts and of any loss or waste of money or other property owned by, or vested in, the Village Panchayat, Panchayat Union Council or District Panchayat which has been caused or facilitated by breach of duty or other misconduct on the part of any person.

Contribution to expenditure by other Local Authorities. - If the expenditure incurred by the Government or by any other local authority in connection with any work for the purpose of this Act is such as to benefit the inhabitants of the area within the jurisdiction of a Village Panchayat, Panchayat Union Council or District Panchayat, the Village Panchayat, Panchayat Union Council or District Panchayat, as the case may be, may, if authorized by this Act, and shall, if directed by the Government, make a contribution towards such expenditure.

Recovery of loans and advances made by Government. —

1. (1) Notwithstanding anything contained in this Act, if a Panchayat fails to make any payment in respect of any loan or advance made by the Government, the Government may make an order directing the person having the custody of the balance of the Village Panchayat Fund or the Panchayat Union Fund, or the District Panchayat Fund, as the case may be, to pay the portion of such loan or advance out of such balance as he may from time to time consider necessary to meet the amount due.
2. (2) Every person to whom an order is issued under sub-section (1), shall be bound to comply with such order.

Application of certain sections of this Act to District Panchayat. — The provisions of sections 190, 191, 192, 193, 194 and 195 shall, as far as may be, apply in relation to the District Panchayat as they apply in relation to the Panchayat Union Council and any reference to "Panchayat Union Council" and "Panchayat Union Fund" in the said sections shall be deemed to be a reference to the "District Panchayat" and "District Panchayat General Fund", respectively.

Certain powers and functions of District Panchayat to be notified by the Government.— The Government may, by notification, entrust to the District Panchayat such powers and functions as they may deem fit, relating to developmental activities, which are being exercised by the Government departments at the district level.

Finance Commission.—

1. (1) The Governor shall, as soon as may be, within one year from the commencement of the Constitution (Seventy-third Amendment) Act, 1992, and thereafter at the expiration of every fifth year, constitute a Finance Commission to review the financial position of the Panchayats and to make recommendations to the Governor as to,—
   • (a) the principles which should govern—
     • (i) the distribution between the State and the Panchayats of the net proceeds of the taxes, duties, tolls and fees leviable by the State, which may be divided between them under this Act and the allocation between the Panchayats at all levels of their respective shares of such proceeds;
     • (ii) the determination of the taxes, duties, tolls and fees which may be assigned to, or appropriated by, the Panchayats;
     • (iii) the grants-in-aid to the Panchayats from the Consolidated Fund of the State;
   • (b) the measures needed to improve the financial position of the Panchayats;
   • (c) any other matter referred to the Finance Commission by the Governor in the interests of sound finance of the Panchayats.
2. (2) The Finance Commission shall consist of such number of members having such special qualifications and shall be appointed in such manner as may be prescribed.
3. (3) The Commission shall determine their procedure and shall have such powers in the performance of their functions as the Governor may, by notification, confer on them.
4. (4) The Governor shall cause every recommendation made by the Commission under this section together with an explanatory memorandum as to the action taken thereon to be laid before the Legislative Assembly.