Guidance value to form basis of property tax in Bengaluru

Bengaluru: Guidance value will now form the basis for calculating property tax in Bengaluru. The present system of assessment, which classifies properties under different zones (A-E), will be scrapped. 

As per the draft notification issued by the Bruhat Bengaluru Mahanagara Palike (BBMP) on Tuesday, property tax will be calculated by clubbing two components — the guidance value of the property and the built-up area. 

Starting April 1, several immovable properties in Bengaluru will likely see a dramatic jump in annual tax though the increase will be capped at 20% from what owners paid the previous year. They will have to pay the difference in the subsequent years until the gap is bridged. 

Properties, including flats, have been further classified into tenanted, self-occupied and fully vacant. Each category has been assigned a different percentage of guidance value. For example, 0.1% of the guidance value is the base rate for a self-occupied property while it will be 0.5% for non-residential buildings. 

The cost of the built-up area for a residential building has been fixed at Rs 1,500 per square feet with a 3 per cent annual depreciation. 

Owners who put up telecommunication towers, hoardings or electronic devices on their buildings or lands will pay Rs 20,000 per year in addition to the property tax. 

Houses built for the poor by the government and those declared as slums will have an annual composite property tax of Rs 300. 

The civic body will not reduce the existing property tax if the new system results in a lower payable property tax. 

The notification also empowers the BBMP to increase the tax by 5% on April 1 every year, starting in 2025. As and when there is a revision of the guidance value, it will also apply to property tax. 

The BBMP appears to have dropped a bombshell as it published the notification without holding public consultation or training its staff. What's more, it has given the public only 15 days to raise objections as against the standard 30 days. 

A senior BBMP official said the notification would come into effect only in the next financial year and there was enough time to train both the staff and create awareness. 

"Our purpose is not to collect more taxes but to bring in a simpler and more rational tax system,” Munish Moudgil, the BBMP’s Special Commissioner for Revenue, told DH. "It's also the Union government's policy that unless the property tax is linked to the guidance value, the BBMP won't get funds under the 15th Finance Commission." 

Moudgil said municipal corporations across Karnataka had been charging property tax based on guidance value since 2003. 

He insisted that property tax assessment based on zonal classification was "irrational" because houses in the same neighbourhood were classified under different zones.