Simplifying Property tax Assessment

The BBMP (Bruhat Bengaluru Mahanagara Palike, the civic body of Bangalore) is probably working on the revision of property tax to be paid by property owners for the year 2013-14. The last revision had taken place five years back. At present the BBMP has a huge staff in the revenue department for assessing and collecting of property tax. As the tax to be paid is self-declared, random checks on properties have to be made. Besides, huge amount of money is spent on advertisement to create awareness among property owners, the need to pay their tax. The whole process of tax collection could be simplified if instead of built-up area, the BBMP takes the dimension of the site as criteria while fixing property tax. All property owners have documents mentioning the area of their sites which are foolproof. Once it is checked and the data stored, the BBMP could fix property tax uniformly on sites of the same dimension, the amount increasing corresponding to the size of the site. As it is the site value which is taken into consideration while purchasing a property, the present privilege of reducing certain percentage of property tax for old houses in the form of depreciation could be stopped. Once the property tax on the basis of the area of the site is fixed, this could be increased at a small rate of three to five percent once in three years or as per the rules of the municipal act. The payment of the property tax should be only through banks, via automatic money transfer. This step will lessen paper work and save property owners from filling forms every year standing in queues. The BBMP would also save manpower utilized for processing the forms, collecting cash and cheques, remitting it to banks, etc. Property taxes on flats and commercial premises have to be calculated on the basis of built-up area and the same may be continued, but the payment of tax should be through banks by means of automatic fund transfer facility.   

Some people may object the idea of fixing property tax on sites instead of built-up area as owners who have constructed two/three stories and have rented out will be paying the same property tax as paid by owners who have constructed small houses for self-residing. While this is true we should also take into consideration of the fact that by having more built-up area, the owner has given impetus to the economy by way of purchasing construction materials, providing wages and making houses available for people to reside. Moreover when a person owning either a two square built-up area on a 30X40 site or a four storied building (with marble flooring, Italian tiles and other modern fitting) on a 30X40 site decides to sell, the purchaser will pay the prevailing market value of the site and not on the built-up area. As site value especially in Bangalore (and also other cities) is appreciating, fixing property tax based on the dimension of the site would yield good income to local bodies.

At present property tax on rented houses is calculated along with the house in which the owners reside and collected once for all. If property tax is fixed uniformly based on the area of the site, the BBMP will find it difficult to assess houses provided for rent. The solution for this is to introduce a law by which payment of rents by tenants to the owners should be made compulsorily through Banks where a special rent account should be opened and a percentage of the rent credited to the BBMP.

The above step would be beneficial to BBMP in the long run as fixation of property tax would be simple and foolproof. Transfer through bank means nil collection charges and an assured income of a source of revenue. There will also be no need for the BBMP to calculate property tax on additional construction by house owners. Lastly this would result in zero corruption in the revenue department of the BBMP.

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