Bengaluru’s persuasive property tax system
ECONOMY & POLICY

Bengaluru’s persuasive property tax system

The Bangalore Municipal Corporation in April 2000 introduced a self-assessment scheme (SAS). It was a self-declaration scheme which required one to self-assess the values of their property and calculate the tax to be paid on it. The tax rate could be calculated by using a formula that included the location of the property, built-up area, type of construction, usage (residential or commercial), occupancy (rebate for own use), and age (for depreciation). The tax rate was 20% for residential property and 25% for non-residential. Owner-occupied property received a 50% rebate. The guidance value published by the Department of Stamps and Registration was used for this assessment and a mandate was established for revising the guidance value every four years.

Since amendments were not made to the Karnataka Municipal Act 1976, the scheme was kept optional to avoid any legal disputes. The taxpayers had the facility of filing the return at any branch of the 8 selected public sector banks. Additionally, 50 payment clinics were also opened to assist taxpayers in filing returns. And the tax assessed under the scheme would be in force for the next five years.

Various measures to push self-assessment system in tax assessment were taken:

  • Increase in property tax liability was capped at two and a half times the original liability, but any calculated decrease over the previous period was also restricted to 25%
  • Bangalore Agenda Task Force (BATF) was set up as a private-sector group of technocrats and eminent citizens to understand citizen concerns by reaching out and suggesting solutions
  • A campaign was carried out for 45 days in newspapers through listing frequently asked questions on SAS and providing answers for building taxpayer confidence These efforts helped in increasing the Property tax collection by 33% in 2000-2001. But because of the voluntary aspect of SAS, the growth in collections dropped sharply in the subsequent two years as most owners of new properties did not join in. For making this model viable,strong enforcement was the need of the hour backed by random checks and stringent recovery provisions. While these efforts in 2003-04 and 2005-06 yielded revenue growth of 15-16% per annum it was evident that stability in revenue collection from property tax could only be ensured if property valuation was revised at regular intervals.
  • Further reforms were introduced to the scheme to push tax assessment and collection:
  • An amendment was passed to the KMC Act to adopt an area-based system (known as the Unit Area Value system) for assessment of properties in BBMP area with effect from the assessment year 2008-09
  • An option to file returns online was also made available to the taxpayers
  • A provision was made for mandatory random check of 15% of the returns filed each year and provided for a penalty for false declaration.
  • All these efforts again helped in yielding exceptional results. The number of properties covered has increased from 700,000 in 2007-08 (before the reform) to 800,000 in 2008-09, 900,000 in 2009-10 and 1.2 million in 2010-11 (though according to GIS the total number of properties is 15 lakh). The amount of tax collected has increased from Rs 4.3 billion in 2007- 08 to Rs 7.8 billion in 2008-09, Rs 8.8 billion in 2009-10, and Rs 11.2 billion in 2010-11. Indian cities would do well to improve their financial situation through property tax reforms, and Bengaluru’s efforts are a visible example.

    Image credit: Pixabay

    The Bangalore Municipal Corporation in April 2000 introduced a self-assessment scheme (SAS). It was a self-declaration scheme which required one to self-assess the values of their property and calculate the tax to be paid on it. The tax rate could be calculated by using a formula that included the location of the property, built-up area, type of construction, usage (residential or commercial), occupancy (rebate for own use), and age (for depreciation). The tax rate was 20% for residential property and 25% for non-residential. Owner-occupied property received a 50% rebate. The guidance value published by the Department of Stamps and Registration was used for this assessment and a mandate was established for revising the guidance value every four years. Since amendments were not made to the Karnataka Municipal Act 1976, the scheme was kept optional to avoid any legal disputes. The taxpayers had the facility of filing the return at any branch of the 8 selected public sector banks. Additionally, 50 payment clinics were also opened to assist taxpayers in filing returns. And the tax assessed under the scheme would be in force for the next five years. Various measures to push self-assessment system in tax assessment were taken: Increase in property tax liability was capped at two and a half times the original liability, but any calculated decrease over the previous period was also restricted to 25% Bangalore Agenda Task Force (BATF) was set up as a private-sector group of technocrats and eminent citizens to understand citizen concerns by reaching out and suggesting solutions A campaign was carried out for 45 days in newspapers through listing frequently asked questions on SAS and providing answers for building taxpayer confidence These efforts helped in increasing the Property tax collection by 33% in 2000-2001. But because of the voluntary aspect of SAS, the growth in collections dropped sharply in the subsequent two years as most owners of new properties did not join in. For making this model viable,strong enforcement was the need of the hour backed by random checks and stringent recovery provisions. While these efforts in 2003-04 and 2005-06 yielded revenue growth of 15-16% per annum it was evident that stability in revenue collection from property tax could only be ensured if property valuation was revised at regular intervals. Further reforms were introduced to the scheme to push tax assessment and collection: An amendment was passed to the KMC Act to adopt an area-based system (known as the Unit Area Value system) for assessment of properties in BBMP area with effect from the assessment year 2008-09 An option to file returns online was also made available to the taxpayers A provision was made for mandatory random check of 15% of the returns filed each year and provided for a penalty for false declaration. All these efforts again helped in yielding exceptional results. The number of properties covered has increased from 700,000 in 2007-08 (before the reform) to 800,000 in 2008-09, 900,000 in 2009-10 and 1.2 million in 2010-11 (though according to GIS the total number of properties is 15 lakh). The amount of tax collected has increased from Rs 4.3 billion in 2007- 08 to Rs 7.8 billion in 2008-09, Rs 8.8 billion in 2009-10, and Rs 11.2 billion in 2010-11. Indian cities would do well to improve their financial situation through property tax reforms, and Bengaluru’s efforts are a visible example. Image credit: Pixabay

    Next Story
    Products

    Viva ACP Launches FR A1-Rated Honeycomb Panels for Fire Safety

    Viva, Asia’s largest manufacturer and supplier of aluminium composite panels (ACP) introduced its FR A1-rated Honeycomb Panels, setting a new industry benchmark for fire safety and architectural excellence. Engineered to deliver exceptional performance, these panels combine advanced fire-resistance technology with aesthetic versatility, offering a revolutionary solution for safety-critical environments.The FR A1 rating represents the highest standard of fire resistance under the European Standard EN 13501-1, signifying non-combustibility and zero contribution to fire, smoke, or toxic emissio..

    Next Story
    Real Estate

    Almal Real Estate Expands into Commercial, Global Markets

    Almal Real Estate Development is soon to announce its upcoming expansion into new verticals and international markets as part of its strategic growth plans for 2030. The company, known for its innovative luxury residential and hospitality developments, is preparing to diversify into the commercial sector with the introduction of The Smart Space, a network of business centers in UAE featuring five-star amenities. Additionally, Almal is entering new markets in Bali and Thailand as a community developer, focusing on villa and townhouse projects.The expansion into the commercial real estate sector..

    Next Story
    Infrastructure Urban

    NABARD Approves Rs 9.03 Billion for 127 Projects in Himachal

    The Himachal Pradesh government has secured approval from the National Bank for Agriculture and Rural Development (NABARD) for 127 projects worth Rs 9.03 billion for the 2024-25 fiscal, Chief Minister Sukhvinder Singh Sukhu announced. During a meeting with MLAs from Kangra, Kullu, Kinnaur, Solan, Chamba, Bilaspur, and Lahaul-Spiti districts to discuss priorities for the 2025-26 budget, Sukhu said the approved projects include 50 MLA-priority schemes under the Public Works Department, valued at Rs 4.12 billion, and 23 MLA-priority schemes under the Jal Shakti Vibhag, costing Rs 1.79 billio..

    Advertisement

    Advertisement

    Subscribe to Our Newsletter

    Get daily newsletters around different themes from Construction world.

    STAY CONNECTED

    Advertisement

    Advertisement

    Advertisement

    Advertisement

    Talk to us?