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:

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.

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