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MAHALAKSHMI MAD11019

LAW AND GOVERNANCE PRACTICUM INDIVIDUAL REPORT

Contents

PROPERTY TAX REFORMATIONS IN BANGALORE ......................................................................................... 2 PROPERTY TAX: ......................................................................................................................................... 3 FORMATION OF THE BBMP: ..................................................................................................................... 4 TAX ASSESSMENT: ..................................................................................................................................... 6 BEGUR WARD:........................................................................................................................................... 7 ISSUES: ...................................................................................................................................................... 8 CONCLUSION:............................................................................................................................................ 9

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PROPERTY TAX REFORMATIONS IN BANGALORE

The geographies of the urban areas had been constantly expanding throughout the world. India especially after the adaptation of the policies of globalization and privatization has opened the market for global investments and had been prone to drastic development and other related changes. The urban cities have been developing in terms of infrastructure, facilities and employment. This has also resulted in excessive concentration of population in urban cities and expansion of the municipalities. Though there had been positive changes, the globalization has also resulted in other issues like health, education, unemployment and the cities like Bangalore also have a substantial percentage of people who are under the poverty line. The crisis in municipal services has been observed by citizens and the municipalities in the urban cities. The government and other international agencies like the World Bank, United Nations and Asian Development Bank had been trying to understand the system and also come up with strategies to increase the effectiveness of the municipal governance through suitable reforms at various levels. The Bangalore City Municipality being one of the important cities that has gained so much development projects in the recent years and is known as the silicon valley of India. The city also has been constantly taking efforts to improve the efficiency of the municipal functioning through various reforms and has been constantly has been trying to increase its capacity in order to cater to the needs of its citizens. In this paper i have tried to look into the formation of the BBMP and also reforms in the assessment of property tax system in Bangalore and also to draw a comparison with the other City Municipalities in our country.

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PROPERTY TAX:
Property tax constitutes the single largest source of revenue to the urban local bodies in India. In spite of loopholes in the levy, assessment and collection, this tax continues to be most significant to the ULBs1. The Bangalore city has taken up lot of initiatives to enhance the revenue generation based on the property tax. The city known for its technological advancement has forced the municipalities to also take up some technological advanced steps to cater to the needs of the people. One such effort had been the adaptation of the Geographical Information System (GIS) for the mapping of properties. The property assessment system is been defined within the legislative provisions of the Karnataka Municipal Corporation Act, 1976. Under this act, it has been stipulated that taxation norms are to be revised once in every five year. The provisions stipulated have not been applied in reality and there has been no revisions taking place since the year 19722. The reason claimed was that the elected representatives were not willing to bring any changes as they had the fear they may lose their vote banks. Initially the properties were assessed based on the annual ratable value (ARV) and in the year 2000 the self-assessment scheme was introduced by the BMC which was one of the effective means to achieve better efficiency and is considered as one of the important reforms undertaken by the Municipality. The transformation of BMP into BBMP had been playing a major role in the transformations in the property tax assessment which was adapted to all the eight zones in the year 2008.

http://www.niua.org/publications/urban_india/part2.pdf

2 heim.ifi.uio.no/~sundeeps/.../Taxreform%20in%20banglore.pdf

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FORMATION OF THE BBMP:

The Bangalore city has a vast history of municipal governance that can be traced back to as early as to the year 1862. During the British rule, a Municipal board was formed based on the Improvement of Towns Act of 1850. There was later a similar body established in the containment area of Bangalore. These bodies adopted the concept of having not only elected representatives but also started collecting taxes. After the independence, the two independent bodies called the Bangalore City Municipality and the Bangalore Civil and Military Station Municipality were merged together to form the Corporation of the city of Bangalore in 1949. It came into force under the Bangalore City Corporation Act. The name was then changed initially to Bangalore City Corporation (BCC) and then to Bangalore Mahanagara Palike (BMP). The greater Bangalore Municipal Corporation called the Bruhat Bengaluru Mahanagara Palike (BBMP) was established in the year 2007 and represents the administrative body which is responsible for the civic and the infrastructural assets of the city. It was formed merging 110 villages along with the seven city municipal councils and also one town municipal council3. It has elected representatives called corporators from each ward and elections to the council is held every five years. BBMP is the fourth largest municipal corporation in India after Mumbai, Delhi and Chennai. It works along with other civic bodies like the Bangalore Development Authority (BDA) and is responsible for providing all the basic amenities and facilities for the people. BBMP caters to the various needs of people and consists of various departments like health, hygiene, licensing, revenue, water bodies and welfare of the citizens.

With reference to the website http://bbmp.gov.in/ http://218.248.45.169/download/revenue/introductionandobjectives.pdf

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The annual ratable value (ARV) was the means of assessment of properties that existed prior to the reforms till the year 2000. Under this system, the tax officials inspected the premises when the property was assessed for the first time. Then the officials based in the reasonable expectation of rent issued the notice that determined the tax payable. This system of assessment often came into conflict with the Rental Control Act and has other problems related to assessment, taxation and collecting taxes. The courts referred to the Rental Control Act for the determination of the fair rent and the local authorities could not increase the amount of taxes beyond that limit. The low penalty for defaulters which was only around 5% of the default taxes led to lot of citizens not paying taxes or it was paid after a delay. Other issues that were identified with the ARV system of assessment of property tax: Absence of objective criteria Lack of transparency and increase in corruption Collision between the tax payers and the tax officials.

Due to the increased conflicts and complaints, there was a pressure on the municipality to come up with certain immediate reforms in the assessment structure of the Bangalore Municipal Corporation. The BMC in the year 2000 introduced the Self-Assessment Scheme (SAS) which was based on self-declaration and was more simple and transparent means of assessment for property tax. But the law was made optional as there were no amendments in the KMC Act that were done to make provisions for the reform. Under the leadership of the BMCs commissioner, K. Jairaj, the awareness about the SAS increased. When in the year 2007, the BMC expanded, people got more comfortable with the SAS and the citizens showed resistance to shift to capital-value system. The KMC act was amended as a result to make provisions for the SAS and the assessment was based on the unit area value system.

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The main features of the SAS system are4: 5% rebate is available for those who pay entire year tax within 30 days from the date of the commencement of the financial year Property tax shall be paid in two equal instalments, the First being before 30th May & Second by 29th November of each financial year. After the stipulated time, the Property tax has to be paid along with interest @ 2% per month. Penalty of Rs. 100/- will be levied for non-filing the declarations along with the tax. In respect of the properties for which no declarations have been filed within the stipulated time, the Corporation staff will issue notice to the owner of the property calling for information, assess the property for property tax and issue notice of assessment.

TAX ASSESSMENT:
Unit area value under SAS: The self-assessment scheme which was introduced in the year 2008 offers citizens of Begur to assess their property tax. The property tax assessment is based on the unit area value as early it was based on annual rental value so later government decided to delink rent control law from property tax assessment. Now new policy does not come under the preview of rental value law. The new system has been evolved on the mass appraisal system of properties. The city of Bangalore has been classified into six zones based on the property valuation done by revenue of department.5 So basically there are four criteria to do self-assessment scheme:6
4

Zone in which your apartment lies Total built up area of your apartment

Taken from internet source-http://218.248.45.169/download/revenue/introductionandobjectives.pdf

5 6

http://www.indiaproperties.com/articles/taxation-legal/bangalore.aspx http://www.vijaypadiyar.in/blog/2010/05/how-to-calculate-property-tax-bbmp

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Total car parking area allotted to you Year of construction of apartment

This important system has helped in not only in the efficiency of the system but also has increased the property collection through the years. Collection of property tax for the last 5 year is as under7:-

Year 2004-05 2005-06 2006-07 2007-08 2008-09

Amount (Rs. in crores) 230 - 00 258 - 00 360 - 00 449 - 00 (BBMP) 748 - 00 (SAS-BBMP)

BEGUR WARD:
If we take the case study of the Begur ward, which is one of the wards under the Bommanahalli Zone, it was a Panchayat before it was merged with the BBMP and hence there was no separate revenue department that was functional. The Panchayat was the only body that was collecting the taxes under the provisions of the Panchayati Raj Act. Begur comes under the Bangalore South constituency and has a population of about 19287 according to the 2001 Census of India data but at present there has been a substantial increase in the population. According to the ward councillor of the Begur ward there is population of around 90,000 at present and covers an area of 18.80 Sq. Km. The ward is identified under zone
7

Taken from internet source-http://218.248.45.169/download/revenue/introductionandobjectives.pdf

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F and comes under the backward category B8. Begur comprises of ten villages and has collected revenue of about 25 Crores in 2011 according to the information provided by the ward office. The SAS can be viewed as one of the important reforms that were initiated by the municipal department of the Bangalore city. There are other municipal cities that are also trying to adopt this system of self-assessment for property tax. Like Gurgaon recently out of the target of Rs.300 Crores, the municipality could collect only Rs. 50 Crores in the past financial year9. The Municipal Corporation is planning to bring reformations in the revenue department and also to adopt the SAS system. Similarly other cities like Mumbai are also in the process of property tax reformations.

ISSUES:
Though the Bangalore city has been successful in bringing tax reforms and also in implementation of the SAS system, there have also been certain issues related to it too. The SAS is based on the guidance value which is usually less than the actual market value. Also from the interaction with the officials in Begur ward and the community people, there were some key problems that were relevant to the ward in specific. The people have to pay almost double the tax rate when they became part of the BBMP and this has resulted in creating a tax burden especially among the economically backward sections of the society. The verification is done only around 10% in the ward, this may not prove sufficient. There is no strict rules regarding the defaulters and also the people may not register the actual value or the constructed area. Also many people were not aware of the objectives or provisions that were present under the SelfAssessment Scheme.

8
9

Reference to website http://bbmpelections.in/wards/192

http://articles.timesofindia.indiatimes.com/2012-04-17/gurgaon/31355318_1_house-tax-property-tax-mcg

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CONCLUSION:
Although the reforms that were taken by the Bangalore Municipality had some issues and problems, they were essential and have showed continuous improvement of the governance and have helped in meeting the needs of the people. Thus, reforms in the various departments especially in the revenue department for the assessment of property had proved to be a useful one and Karnataka acts as a role model for other city municipalities to take it up.