Bengaluru shifts to new property tax structure from April 1; to add burden on rent

Bengaluru: Owners who rented their properties for residential and commercial purposes will feel the pinch as the Bruhat Bengaluru Mahanagara Palike (BBMP) prepares to implement guidance value-based property tax from April 1.

The rise in property tax value is bound to further increase rents for tenants already paying higher annual rents.

The new system requires tenanted properties to pay twice the tax amount given by self-occupied residential properties, while the tariff is hiked by three to five times for different categories of commercial buildings.

Even though the current rule lists seven different tariffs for rented properties like paying guest accommodation, convention halls, or malls, things like having an air conditioner or escalators do not count toward the tax structure in the new system.

Traders and property owners anticipate an increase in the annual BBMP tax by at least 40 per cent since the guidance value has been hiked by 33 per cent. Even though the BBMP limited the property tax hike to 20 per cent in its new notification, owners still need to pay the difference in the next tax year.

Referring to a case where property taxes for rental buildings are set to skyrocket nearly nine-fold, Clement Jayakumar, a resident of Mahadevapura, expressed concerns that the BBMP is not offering any extra services, despite doubling the tax on rented houses or flats.

“The new rule will have a spiraling effect and eventually, the tenants will have to bear the additional cost,” he said.

A senior BBMP official rejected the increase of tax by 10 or 20 times.

“This is not a new model that we are adopting,” he clarified. “Almost all cities in Karnataka have adopted the guidance value-based property tax system. The BBMP did a test run for over six lakh cases to see the implication of the new system. Overall, we found that the property tax collection will not increase beyond 5 per cent. So, there is no need to be concerned.”

Mixed views

Hagadur resident Murali Govindarajulu said: “In the new system, the person who violated the sanctioned plan will continue to pay the regular property tax rates. The BBMP should have incentivised a person who has built without any deviation. Considering such cases are less than 1 per cent, they should have been exempted from property tax to encourage others to follow the rule.”

A public policy professional said that the Palike came up with zonal classification to calculate the property tax since not all streets in Bengaluru were mapped. “Even now, not all streets are mapped, and this will lead to many errors in the calculation of tax,” said the professional. “There is also a possibility that some buildings may see a huge increase in property tax.”