Property Tax and Concessions

Property Tax

Finally, there is some good news for new home buyers in Bangalore. As per the revised Direct Tax Code, home owners are now allowed a property tax concession on interest paid upon INR 1,50,000 as home loan. Further, it has been decided that rental income will not be taxed by presumptive basis. For defaulters who haven’t been able to clear their property tax dues since 2008, the Bruhat Bangalore Mahanagara Palike (BBMP) concessional rates have been established, and the interest is likely to be reduced to 10% instead of the previous 20%.

The current tax benefits on property loan interests were established back in 2002. With the renewed concession rates, the effective rate for a borrower comes down to around 4% and is certainly a huge benefit for the new property buyer. The BBMP taxation and financial standing committee are also allowing a concession for small property owners having dues amounting to and less than INR 2,000 per annum before 31st March. No installments are allowed under this scheme. The BBMP currently has more than 16 lakh registered property owners out of which 3 lakh homeowners are yet to complete their property tax dues.

In 2008, BBMP wanted a 30% increase in property tax rates, but the committee stuck to a 20% increase. The minister says that this will not be too much of a burden on the average home owner as the taxes aren’t quite increasing in real terms when matched with the depreciating values of properties. The estimated collection from the current scheme of things will be INR 1,500 Crores.

The idea of property tax concessions for Bangaloreans was mooted after Shaikh Altaf, a resident presented a memorandum on 21st November 2013 to the Mayor. The letter said that if the government decides to provide a rebate of 50% to the residents, it will be able to reach 100% property tax collection.

The implication of all this statistics is huge for a home owner in Bangalore. Owning a home is now cheaper and so are the maintenance costs. Rather than going for rented properties, owning a property seems to be a more viable option. Moreover, with renting payment offered a concession, new property ownership can be viewed as an investment that pays for itself. Property owners don’t have to worry much about mortgages and tax payments and can even expect to earn a bit of profits on the rents.

If you have been considering buying a property, now is the best time to act. The Bangalore property market hasn’t been so inviting ever.

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by Sridhar Kulkarni via Shriram Properties Bangalore