Property taxes are due city-wide, but clear information about how the tax is to be calculated has still not reached citizens, and this has created much disturbance and worry.
To address the confusion, the Citizens’ Action Forum (CAF) on 29th November passed a resolution demanding that the state government should bring back the Annual Rateable Value (ARV) based property tax system. CAF claims that the revised system which the BBMP has introduced recently was a violation of all the promises politicians had made before the elections.
The meeting saw a participation of around hundered people from various residents associations who voiced their concern. The meeting was an open discussion on the suggestions and queries of people with the elected MLAs – N L Narendra Babu (Mahalaxmi Layout), Dinesh Gundu Rao (Gandhi Nagar), B N Vijay Kumar (Jayanagar) and Ravi Subramanya (Basavangudi). Present with them was B K Chandrashekhar, former Chairman of the legislative council.
The new system involves a concept called Unit Area Value. According to the BBMP, the property tax shall be levied at a percentage not less than 20 per cent and not more than 25 per cent of the taxable annual value of a building, vacant land or both. The taxable annual value of a building is calculated by multiplying the corresponding unit area value (UAV) with the total built up area of a building, minus depreciation, at a rate depending on the age of the building
What is Unit Area Value? UAV means an average rate of expected returns from the property, per sq.ft., per month. For Bengaluru, this will be determined by the BBMP Commissioner on the basis of the average market rate determined through a mass appraisal method or real estate market information or any other reliable source. Different rates may be determined for different areas or street by classifying them into zones. Other factors include: the nature of use of the property and the class of buildings and vacant lands.
Though all of this is clear in the BBMP’s website that hosts the amendment and the rules, there is no mention of the exact value (or values) at which the taxes will be calculated, nor is there any mention of what will be the various zones. (See here: BBMP Property Tax Amendments.)
"More than anything, I would like to get a property tax law that can be easily understood by the people," clarified N S Mukunda, representing CAF. "The BBMP has, till now, not declared how the taxes will be calculated. What rates will be taken and what will be the way of calculation. Thus, we cannot understand the resultant amount we need to pay," complained Mukunda. He is planning his next meeting with the chief minister this month. CAF says its objective is to ensure a just, fair, transparent and equitable tax system and not to oppose collection of property tax by the Bruhat Bangalore Mahanagar Palike (BBMP).
Citizen Matters checked with D L Chandrashekhar, Deputy Commissioner (Revenue), BBMP. "Within two or three days the rates will be declared by the Commissioner of BBMP through a gazette notification. People should have some patience," says Chandrasekhar.
Citizen suggestions from the 29th November meeting
The first suggestion was to bring back the earlier ARV system under SAS immediately and collect the tax at the earlier rates. Also, to extend it to cover the entire BBMP area. Some others included updating the city’s property registers on continuous basis as mandated in section 112 of the Karnataka Municipal Council Act and uploading this on a weekly basis to the Bruhat Bangalore Mahanagara Palike (BBMP) website along with the demand, collection and balance figures pertaining to the property taxes.
One suggestion that got maximum support from the public and, also, from Jayanagar MLA, Vijya Kumar, was that of holding public hearings at the assembly constituency level to take suggestions from citizens. A law should be drafted after this, felt citizens. As an interim measure, it was proposed to constitute a working group consisting of BBMP officers, four to five citizens from groups who have worked extensively on property tax matters and two representatives from the government, should be formed to suggest the suitable law for property tax. No BBMP officials were present at the meeting.
The fact that this suggestion attracted support at a time when the BBMP has already announced the new valuation system only shows that citizens groups and the BBMP are working in isolation. Earlier this year, candidates running for MLA seats from Bangalore constituencies made several promises. But at this meeting, all MLAs, except Vijay Kumar, left after their speeches. The rest of the public interaction continued amongst the citizens themselves.
Other suggestions
*Rates must be revised in five-year blocks
*Increase tax coverage from the present 45 per cent to at least 90 per cent in a period of 2 years, which can lead to a tax revenue of nearly Rs.2000 crores.
*Tax all the properties, whether or not they have Khatha.
* Extend the benefit of depreciation for the period 2001-08 and the rebate of 5 per cent for timely payment.
CVS and ARV
How is tax calculated in the CVS and ARV methods?
The capital value system is based on the capital value of property. The capital value of a property is fixed by the BBMP’s Revenue Department. If this system is applied, property tax payers, typically, worry that they will have to pay more.
Under the CVS, the calculation of tax is based on capital value of the building, which is in turn based on the cost of the land, as well as, the cost of the building, net of depreciation. The rate of tax varies from 0.3 to 0.6 per cent (on the sum total of land and building) for residential propertie and from 0.5 to 1.5 per cent for commercial properties. To this amount, an additional 34 per cent health cess will be added.
The building cost is considered as per the scheduled rate suggested by the Public Works Department. For determining the value of land, the system uses rates notified by the Stamps and Registration Department which are, in turn, based on the location of the property.
In the year 2000, the self-assessment scheme (SAS) was introduced in Bangalore. The SAS uses the annual rateable value (ARV) method for calculating the property tax. This system is based on standard rents fixed by the Rent Control Act. Thus, in this, the probable gross rent of a property is taken into account to estimate the tax. For domestic buildings, 20 percent of the gross rent amount (annual) is calculated. For commercial buildings, 25 percent of the amount is calculated.
Ball in the BBMP’s court
There is also word that BBMP may directly setup counters in appartment complexes in the city to collect taxes. An announcement has appeared on the notice boards of the Mantri Elegance community on Bannerghatta Road, near Jayadeva circle.
Mukunda was skeptical, again. "I request everyone not to get fooled and pay the tax at the small counters put up in individual appartment complexes by BBMP. Please go to the Bangalore One Centre," he tells citizens.
For the time being, citizens need to wait till the confusion on rates gets resolved, hopefully by the BBMP’s imminent announcement.⊕
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How come nobody has yet picked up on the curious fact that the UAV plan is being mooted by U A Vasanthamurthy?
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Hardly 3 months is left in this financial year. Best would be to continue prevailing SAS and collect the tax for this year