When Bengaluru reels under low tax burden

Bengaluru: The Property Tax collection procedure in BBMP needs to be completely revamped. It is proposed to take up all self-assessment declarations by all major commercial buildings for a detailed verification during 2023-24. These SAS returns will be compared with corresponding documents of other state agencies by using the required software. This is expected to lead to a substantial increase in property tax collection.

Thus reads the BBMP Budget 2023-24. The BBMP collected Rs 3,033 crore in 2021-22. It increased to Rs 3,758 crore in 2022-23. This time, the target is higher, at Rs 4,790 crore. “Excluding cesses which need to be transferred to other institutions, the property tax collection target has been set at Rs 4,412 crore. This target is 27 per cent more than the amount proposed to be collected in the revised budget for 2022-23,” says the budget.

In its previous budget, BBMP estimated a revenue of Rs 1,000 crore from the B-Khata to A-Khata Regularisation Scheme, hoping to bring more properties under the tax net. Thus, every year, the BBMP keeps ambitious targets and ideas to increase the property tax revenue. But, at the end of the year, the actual tax collected falls short of expectations.

Deputy Chief Minister and Bengaluru Development Minister D K Shivakumar is keen on increasing the tax revenue. He spoke about how people declare less built-up areas for their properties while self-assessing the value, citing his own example. This is, in fact, well-known ever since the self-assessment scheme (SAS) came into existence in 2008.

Need for a re-look

“There was a scope to do 10 per cent (initially 5 per cent) random checks per year under the SAS scheme. This was never done. If they had done it, all properties would have been checked by now,” say sources in the know. The last budget speech indicated that such verification will be done this year.

“Physical verification is essential,” says D R Prakash, president of Osborne Layout Residents Welfare Association. He recalls an online system where people could flag properties paying low or no taxes, which now does not exist. “This was withdrawn citing security purposes, probably due to too many skeletons tumbling out,” he says.

The BBMP, in 2016, divided the city into six zones and fixed property taxes based on the built-up area, type of building, zone and other factors. However, this ruffled the feathers of property owners as some had to pay more than 100 per cent more in taxes. Later, the BBMP passed a resolution in the council limiting the hike. Now, the tax is fixed at 20 per cent more than the pre-2016 value if it exceeds it in the zonal structure.

BBMP had tax arrears of more than Rs 2,265 crore in 2018, which could have only gone up now despite Palike trying to waive penalties and interest and encouraging people and entities to pay taxes. 

Another problem is commercial properties getting under-taxed. “BBMP needs to look at the commercial properties. Progressively, they should start looking at how the assessment is done and bring a differential method to fix taxes. In Western countries, the tax on a stadium is not the same as the tax on a shop. The tax is a percentage of the revenue generated,” says Namita Aggarwal, Head of Municipal Revenues - Janaagraha, advocating the same system for Bengaluru.

B Khata properties

The problem is also with many properties built in revenue lands in the 110 villages, seven city municipalities and one town municipality added to Bengaluru in 2007, which need proper khatas and legal recognition.

To bring owners of such properties into the tax net, the BBMP keeps conducting Khata melas, where people will pay betterment charges and get the properties converted. Khata melas are also undertaken for apartments that do not have khatas bifurcated yet pay property taxes under the B register using the SAS number.

However, many beneficiaries say this process is marred with bribes, and it takes a lot of willpower to overcome it. Prabhu Patil, the ex-president of Rohan Vasantha apartment in Marathahalli, says such melas are helpful. In their case, there were occupancy certificates for the flats, but the khata was not bifurcated. Initially, in 2020-21, people had to pay bribe. However, later, they used the Sakala scheme and online facilities and approached the joint commissioner of the Mahadevapura zone when the BBMP officials rejected their application without a valid reason. In two months, they got the khatas and are now a part of the formal A Khata property tax net.

‘Work is on’

Revenue department officials are working to fix the loopholes. Munish Moudgil,  Special Commissioner for Revenue, BBMP, told DH that digitisation of BBMP property records is underway, and the department wants to hand it over to people smoothly. “It is a positive approach. We also aim to automate the change of name in online khata documents when the property transfer happens,” he adds.

“We are doing everything to mop up the property tax revenue. Property tax is in the city’s interest. I request people to pay taxes promptly,” he says.