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

    "Join industry leaders at RAHSTA Expo, India's premier platform for roads, highways and traffic infrastructure. Register now to explore innovations, network with experts and shape the future of mobility."

    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
    Resources

    Jyoti Structures Launches Heat Safety Drive Across Sites

    Jyoti Structures (JSL) has strengthened heat safety measures across its project sites and manufacturing facilities as temperatures rise across India. The company has implemented a Summer Safety Plan covering all transmission line projects to address risks related to heat stress, dehydration and worker fatigue.The initiative includes rescheduling work away from peak afternoon temperatures, provision of drinking water, ORS and lemon-salt solutions, and installation of rest shelters near work areas. Daily toolbox talks, worker health monitoring, first-aid preparedness, emergency transport arrange..

    Next Story
    Real Estate

    MHADA Declares 82 Buildings Most Dangerous in Central and South Mumbai

    The Maharashtra Housing and Area Development Authority (MHADA) has declared 82 buildings as most dangerous across Central and South Mumbai and has appealed to residents to vacate immediately. The list, prepared after structural assessments by the authority, identifies buildings judged to pose imminent risk to occupants and to passersby. Local civic bodies have been asked to coordinate evacuations and to make arrangements for temporary shelter and rehabilitation for displaced households. Officials said the authority prioritised buildings with visible structural distress, severe cracking, tiltin..

    Next Story
    Infrastructure Transport

    Damage Reported At Halwara Airport Terminal After First Rains

    Severe damage was reported at the terminal of Halwara Airport during the first major rain spell of the season, prompting immediate concern among aviation and local authorities. Images from the site showed water ingress and visible deterioration of the terminal interior, affecting passenger areas and ancillary services. The airport authority suspended certain operations temporarily to assess structural safety and ensure passenger wellbeing. Preliminary inspections have prioritised electrical systems and roof seals to prevent further water ingress. State aviation officials ordered a formal inqui..

    Advertisement

    Subscribe to Our Newsletter

    Get daily newsletters around different themes from Construction world.

    STAY CONNECTED

    Advertisement

    Advertisement

    Advertisement