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Wednesday, April 24, 2024

Bengaluru Introduces New Property Tax Structure, Expected Rent Burden Increase

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Bengaluru, India, is set to implement a revised property tax structure effective April, likely exacerbating financial obligations for property owners leasing their premises for residential and commercial use within the city limits. The forthcoming adjustment in property tax values is anticipated to prompt a surge in rental rates for tenants already grappling with escalated housing costs. Under the updated taxation framework, leased properties will incur double the tax liabilities compared to owner-occupied residential units, while tariffs for various commercial properties are poised to surge by 3 to 5 times.

The current tax regimen encompasses seven distinct tariff classifications for leased properties, encompassing diverse establishments such as paying guest accommodations, convention halls, and retail complexes. However, ancillary amenities like air conditioning or escalators remain exempt from taxation considerations.

Market analysts and property stakeholders foresee a minimum 40 percent annual escalation in the Bruhat Bengaluru Mahanagara Palike (BBMP) tax burden, given the recent 33 percent increase in guidance values. Despite the BBMP capping the property tax hike at 20 percent in its latest notification, property owners are still liable to bridge the gap in subsequent tax payments.

Responding to the impending fiscal strain imposed by augmented property taxes on leased properties, local resident Clement Jayakumar, hailing from Mahadevapura, voiced apprehension regarding the BBMP’s decision to double tax obligations without commensurate service enhancements.

“This regulatory shift is poised to precipitate a cascading financial impact, ultimately transferring the burden onto tenants,” he expressed.

Contrary to concerns raised, a senior BBMP official rebuffed assertions of an impending 10-20 fold surge in tax liabilities.

“This taxation model is not a novel initiative; rather, it mirrors prevalent practices adopted across numerous municipalities in Karnataka. The BBMP has meticulously evaluated the ramifications of this revised system, conducting trial assessments encompassing over six lakh cases. Our analysis suggests that the overall escalation in property tax collection will remain capped at 5 percent, thus alleviating concerns of disproportionate financial strain,” affirmed the official.

Concurrently, a public policy analyst underscored procedural flaws within the BBMP’s taxation framework, highlighting the adoption of zonal classifications to compute property taxes sans comprehensive street-level mapping.

“Presently, the absence of exhaustive street-level mapping poses a notable challenge, potentially engendering inaccuracies in tax assessments. Moreover, certain properties may face a disproportionately steep surge in tax liabilities, underscoring the imperative for comprehensive tax reform,” emphasized the analyst.

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