PROPERTY TAX REFORM IN BANGALORE

G.V.SATYA NARAYANA REDDY

MBA - IFM

Introduction• Bangalore is the capital of the State

of Karnataka.

• Legend has it that the name Bangalore comes from the Kannada word “Benda Kaluru” (boiled beans).

• Silicon Valley of IndiaBangalore is one of the fastest-growing Indian metropolises after New Delhi.

City ProfileBangalore City Corporation (BCC) as it was earlier called was established in the year 1949 by merging two municipalities, • ‘The City Area’ and • ‘The Cantonment Area’

• Bangalore Mahanagara Palike came to be called Bruhat Bangalore Mahanagara Palike (BBMP) from16-01-2007.

Comparison of BMP and BBMP

Urban Governance

BBMP has followed decentralized administration at the 8 Zonal levels.

Functions assigned to them :

a. General Administration

b. Revenue Department

c. Engineering Department

d. Health Department

e. Horticulture Department and

f. Education Department.

Property tax administration is decentralized with the respective zonal heads responsible to achieve the annual target of tax collection.

Overview Of Finances

Octori being abolished in the year 1979,

Main source of revenue to BBMP

-Property Tax and

-Grants from the State Government

significant gap in the revenue receipts and revenue expenditure

Trend of BBMP Revenue Expenditure

Existing System• StructureProperties are classified into the following categories

(a) rented properties

(b) owner-occupied properties and

(c) special category that are exempted from property tax.

Assessment of PropertyA zone Re.0.50

B Zone Re. 0.40,

C Zone, Re.0.30,

D Zone, Re.0.25,

E Zone Re.0.20 and

F Zone Re. 0.12

Billing and Collection

The property tax is payable in two installments.

The first installment is due by 30th of May and the second installment by 30th October.

If the tax is not paid by the due date a demand notice is served on the owner to discharge the tax due with15 days

failing which recovery action will proceed.

Bangalore Municipal Corporation: Selected Measures of Property Tax Revenue performance

Monitoring tax collection

Each Zone maintains a demand collection and balance (DCB) register.

This collection register is being computerized. The payment that is made at the Banks.

A defaulters list is prepared at the zone level and regular meetings are held to review the collection.

• Exemptions

• Government Buildings

Reforming the system

• Zoning of The City

For assessment purposes, the city was divided into six land value zones.

The zone classification referred to a land value category

• Category of properties

Distinction in the assessment residential and non-residential use of property.

Residential use of property : 5 categories

Non-residential uses : 11 categories.

The expected rents for the category of usage depending on their zone were pre-determined for rented and self-occupied properties.

RESEDENTIAL

NON-RESENDITIAL- GROUP A

The property tax payable under the self-assessment scheme is a two-line formula driven calculation depending on the location as under (for residential property):

While the same formula was applicable for non-residential properties in Group A. The formula for hotels, hospitals, industries :

Where rv is ratable value, ba=Built-up area, (75% area @ full rate) r= rental rate fixed/sft/month m=months, t1 = total 1 r/2 (25% area @ 50% of the rate) d=depreciation, t2=total 2, t3=total 3, pt =property tax, and 20% = Tax rate).

The scheme provided for deprecation for the age of the building

APPRAISAL OF THE TAX REFORM

• tax reform should address some of the following questions:

• Is the tax understandable?• Does it need to be simplified?• Does the reform measure make any sense

to the taxpayer?• Does the taxpayer understand the procedure

to pay the tax under the reform measures?• Is the tax burden distributed fairly?

ACCEPTANCE OF REFORM

• The Corporation was sensitive to the need for popular support for these changes.

• An education program was part of the marketing plan for this reform.

• City officials met with various interest groups to convince them that the benefits of this program would outweigh the increase in their tax.

• The following are some of the steps that helped in gaining acceptance:

MARKETING SAS 2000

• Informative brochures were printed not only in English and Kannada

• Meetings with Resident Welfare Associations & Trade bodies

• Information through Press Media

• Tax payments tend to be done over the last two to three days, so count down advertisement were issued

BENEFITS OF THE SYSTEM• The division of the city into zones was in effect to revalue properties on an

annual rental base

• This revaluation helped in the buoyancy of property tax overtime

• Several properties in the lower end of the zones fixed during SAS 2000 would move upwards to higher zones

• The objective of the SAS was simple and straightforward - to get property owners to voluntarily declare their property tax liability and to make timely payment.

• City Corporations in the country who have shifted to an area-based system of property tax, there has not been even a single instance of revision of the values

• In Bangalore there is an Ordinance issued by the Government to revise the tax

THANK YOU