The new basis for computing property tax
Commercial property owners, rejoice !
Bangalore has done it again. All over the world, higher taxes are
generally imposed on commercial properties, thereby providing relief
to residential property owners. But here, in namma Bengaluru, it
is the other way around. The new Capital Value System (CVS) based
scheme, the brainchild of the Bangalore Mahanagara Palike (BMP),
has provided a natural exit to the Annual Rental Value (ARV)
based Self Assessment Scheme (SAS) , much to the delight
of commercial property owners.
Under the present 2-year old SAS system, the property
tax is arrived at by calculating the Annual Rentable Value (ARV)
of the building. However under the proposed SAS scheme, the
property tax will be calculated keeping the Capital Value
of the building as the basis. "The capital value of any
building, be it residential or commercial, will be the prevailing
rates in the market. The market rates will be obtained from the
sub-registrars’ office and the tax calculated. There could
be fluctuations in the market rates, but all these fluctuations
will be worked out by the BMP Council, who will also fix the tax
rates" says Mr Ashok Dalwai, BMP Commissioner.
The BMP will introduce the new CVS-based SAS scheme for property
tax in Bangalore from April 2002, replacing the existing
ARV-based SAS scheme. The new scheme, which will be made compulsory,
has been worked out to ensure that all property owners are brought
under the tax net. Heavy penalties will be levied on property tax
defaulters and incentives given to owners, who pay taxes early.
Since SAS 2000 was not mandatory, most commercial property owners
did not opt for it as they felt that the rates were higher. Instead
they went in for general revision, which resulted in rates below
those applicable had they opted for the SAS. And now that the CVS
is introduced, their tax rates will be significantly lower compared
with SAS. In contrast, the residential property taxes are all set
to increase.
The SAS under ARV is equitable and freed the honest tax payer from
the greedy clutches of the corrupt revenue officials. Bringing in
CVS will again open up opportunities for massive corruption in assessment.
The Municipalities Act states that property tax shall be revised
every five years, but the BMP has not done this for 30 years! It
is just two years since the ARV-based scheme was introduced.
Is it fair?
Making the SAS scheme mandatory is welcome, but changing the basis
of computation from Annual Rentable Value (ARV) to Capital Value
System (CVS) is highly questionable and will not have public support.
Why should residential property owners be made to offset the losses
incurred by the BMP on account of commercial property owners? ask
taxation experts. And why has the BMP gone in for CVS when ARV was
already in use and well received? Those are million dollar questions
that only the BMP can answer.
The proposed rates at a glance
| AREA |
SAS tax + 34% cess |
Rs/Sft for CVS |
CVS tax + 34% cess |
| Commercial |
(in Rs) |
(in Rs) |
(in Rs) |
| MG Road |
33,500 |
3,500 |
14,070 |
| Indiranagar |
16,750 |
2,500 |
10,050 |
| Basavangudi |
16,750 |
1,900 |
7,638 |
| Residential |
(in Rs) |
(in Rs) |
(in Rs) |
| Indiranagar |
4,824 |
2,500 |
6,700 |
| Basavangudi |
4,824 |
1,900 |
5,092 |
Assumption:
* 1,000 sft owner occupied property at all locations. In
respect of CVS a consolidated R/sft in the area reflective of land
+ ....building assumed for calculation
* Depreciation not assumed in both cases.
* For CVS, 0.4% of Capital Value for residential and 0.6%
for commercial assumed.
Source: DH News Service
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1:52:58 AM 
