Bengaluru: Come April 1, guidance value (GV) will form the basis of computing property tax in the Bruhat Bengaluru Mahanagara Palike (BBMP) limits.
Even as many residents have expressed their concerns about the new system, the civic body has no plans to reverse the decision, saying all municipal bodies in Karnataka, barring Bengaluru, adopted the GV-based property tax system many years ago.
The new method proposes to replace the existing system where the property tax was calculated based on ‘zonal classification’ and carried a total of five bandwidths (A to E). Officials say this approach was irrational and gave a lot of discretion to the BBMP staff and officers to change the zone (to reduce the property tax) as per their whims and demand favours in return.
New system
In the new system, property tax is computed by clubbing two components: the size of the plot and the total built-up area. A certain percentage of the guidance value — from as low as 0.025% (vacant land) to as high as 0.75% (star hotels) — is assigned to the plot depending on the nature of its use, be it residential, commercial or industrial.
The second component is the built-up area — where the BBMP has fixed a certain percentage (0.025% to 0.75%) of the construction cost (Rs 1,500 to Rs 4,000 per sq ft) — to arrive at the total amount. It will then be divided with a depreciation of 3% per annum to arrive at the final tax but the upper limit has been capped at 60%, meaning buildings older than 20 years will not benefit.
The BBMP has insisted that the new system is aimed at making the computation of property tax simpler and rational.
“Tax as per the new method is capped at 20%, which is an increase over the property tax introduced as per the 2016 rates. So no property will see an increase of more than 20%. Many will see no increase at all,” an official said.
According to the civic body, the average increase over 2016 rate is expected to be less than 10%.
“There has been zero increase in tax rates since 2016. And when the last hike was introduced, the residential tax was increased by 20% and non-residential by 25% over the 2008 rates,” they said, adding the 2016 system had 17 categories with each category further divided into 6 zones.
“Many categories were overlapping and the system was complicated.”
The new system has six categories such as residential, commercial, star hotels, industries, hutments and poor housing units.
Concerns aplenty
To start with, the guidance value-based tax system — first proposed close to a decade ago but shelved owing to public backlash — has been revived without holding public consultations and training its staff. Second, only one-fourth of the 90,000 streets — coming under BBMP limits — are assigned with the guidance value and many apartment complexes are left out. This could result in anomalies in the property tax computation.
On top of this, the new system will continue to be rewarding for owners who have falsified their return under the self-assessment scheme (SAS) and paid less tax either by zonal misclassification, understating the built-up area or misrepresenting the actual usage, unless the BBMP’s staff inspects the properties to cross-verify the claims. On the other hand, the owners — who have paid their taxes honestly — may end up paying more in the future.
D R Prakash, a member of the residents’ welfare association in Bengaluru, objected to the cap of 60% on the depreciation of buildings. “Buildings that are older than 20 years will have to keep paying tax at a higher rate. This is unacceptable. The cap should be increased to 100% and subsequently, tax must be collected only for the land,” he said.
The new system, people residing in the apartments say, will lead to a lot of problems. One, sale deeds and khata extract of many apartments have carried super built-up area instead of the capital area. This may lead to double taxing common areas including car parking, open spaces etc. Second, not all apartment complexes have been assigned guidance value.
Deadline extension
P C Rao, president of the Bruhat Bangalore Hotels' Association, said the minimum time for filing objections should be extended to 60 days from the present 15 days, which expires on March 6.
"The notification empowers the BBMP to increase the property tax by 5% every year. On top of this, as and when there is a revision of the guidance value, the same will apply to the property tax. This is unacceptable,” he said. The BBMP, however, maintains that there is no need to be concerned about the new tax computation system, stating it will not result in a drastic increase in property tax.
"When the property owner enters the plot address or apartment name on the website, the guidance value will pop up automatically. The rest of the details including the built-up area are already available in the backend. If there is any mistake in assigning the guidance value, we will take the blame and make necessary corrections,” a senior BBMP official promised.
He added that the increase in property tax had been capped at 20% of what the property owners were paying. "The demand to waive off the 20% increase in the subsequent years is for the government to decide ahead of next year's financial year," the officer said.
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