Bengaluru is poised for a significant surge in property taxes following the proposal by the local municipal corporation Bruhat Bengaluru Mahanagara Palike (BBMP) to adopt guidance value-based tax collection. This move is anticipated to further drive up already soaring apartment rentals, as noted by experts.
Guidance value, set by the government, represents the minimum price of a property.
Under the new draft notification, property tax collection will transition to being based on the guidance value or circle rates in respective areas, replacing the previous zonal classification (A-E) for tax assessment.
Key changes proposed in the draft include doubling the tax for rented properties compared to self-occupied ones. The new tax rates are set at 0.2 percent of the guidance values for rented properties and 0.1 percent for self-occupied ones. Experts foresee potential rent increases, particularly amidst Bengaluru’s rental crisis.
Experts also highlight that the revised proposal will result in higher taxes for property owners, especially following the state government’s increase in guidance values by 25-30 percent on average last year to align with actual property prices.
However, concerns arise as certain outskirts of the city witness guidance values surpassing actual property prices, impacting tax calculations adversely.
BBMP officials emphasize that the move aims to enhance tax collection efficiency and streamline the system, hinting at implementation in the next financial year.
The proposal also includes an annual 5 percent hike in property tax starting from April 1, 2025.
In response, the Karnataka Home Buyers Forum urges changes to the proposed system, expressing concerns over the potential burden on middle-class home buyers due to annual tax increases.
The forum advocates for considering the carpet area, the actual usable space within a property, in tax calculations, citing compliance with Real Estate Regulatory Act (RERA) guidelines.
Further insights from the Bangalore Apartments’ Federation underscore potential 100 percent increases in property tax in prime areas, raising questions about charges for common areas and facilities within apartment complexes.
