New assessment system to push up property tax in Bengaluru

Property tax and user charges for utilities in Bengaluru are set to go up soon as the BBMP, BDA and other agencies have been told to change the way they calculate the same — from unit area value to capital cost of the property.

The “reform” in tax collection is a prerequisite set by the Union government for states to avail the additional borrowing limit of 0.25% of GSDP (gross state domestic product) for the year 2020-21.

The Urban Development Department has told the BBMP that the state government has agreed to the precondition and the new rule has to be implemented for 2020-21.

The change should not be confused with the percentage of property tax, which is revised by the government. “The very base used for assessing property tax will change. Instead of unit-wise calculation that has loopholes, the assessment will be made on the total value of the property,” sources explained.

At present, the property tax assessment in BBMP is based on the Unit Area Value Method which was implemented in 2004.

For example, for a 1,000 sq ft site, the base unit area value is calculated as per the general rent value of a similar property in particular area.

“As per the new system, the tax will be fixed on the value of the property. The property value itself will be calculated as per the guidance value. This system is already in place in the rest of the Karnataka. Only Bengaluru implemented the unit area value rule 16 years ago,” he said.

While the 2004 rule was introduced keeping in mind the high rental value of properties in some zones, it left several loopholes. The unit (rental) value was not updated for the last 16 years.

Officials made a rough calculation to understand how the new system will work. In MG Road area, the present tax for 1,000 sq ft residential unit is Rs 14,880. The new system, based on the tax rate applicable in Mumbai, is Rs 48,908. On Richmond Road, a commercial property of 1,000 sq ft, the present tax is Rs 62,000. The new system will take it up to Rs 81,000.

However, there may be a downside here too. There are six zones in BBMP limits but properties’ unit value have been changed randomly. “The link between unit area value and guidance value has been cut off. It is suspected that the unit area value has been changed for some properties. Some changes may be arbitrary and others may be due to depreciation of a building’s value over time,” sources in the government said.

There are three categories of properties: residential, industrial and commercial. Each of them can be used for own use and rental use. The new system will fix value of properties which will be updated as per the guidance value which will automatically revise the tax.