The New Tax Structure of the Silicon Valley Of India-Bangalore

The Electronic city of the country has a new structure of taxation in place, especially for the plots that have been converted from the agricultural lands to other than agricultural usage. The land owners are now forced to pay tax on time thereby boosting the revenue of the government. In the high priority areas, this move is also set to affect the land prices. The value of property deals is expected to rise. 

Before this change was implemented, that is before March 2017; the government used to levy urban stamp duty on the properties of 10,890 sq. Ft. by per sq. Ft. format. They also considered the rate of the plot in the area. The properties that were above the measurement but were not developed in nature were taken as agricultural lands, and the duty did not apply to them.

The Bane of The Earlier Tax Structure

The agricultural lands have much less duty as compared to the non-agricultural ones. The people took advantage of this situation and brought the agricultural lands and then kept those in an undeveloped condition. Thereby,people were paying a lower tax than they should pay. The government was losing a lot of money as tax every year this way. 

When a developer decided to develop on a property, the single record of the property got divided into multiple branches later on, and this created further problems for the government. According to the new rule, the developer has to apply immediately for the tax payment as soon as he applies for the conversion of the property to the non-agricultural use, irrespective of when the work on the site starts.

In the new system, there are five groups of lands with fixed slabs for each group. The value has been fixed depending on the usage of the plot- whether it is residential, commercial and industrial. As the size of the land declines the tax on it also reduces. 

The implications of the tax change

The serious impacts are going to be felt by the land owners’ and the property developers. For the property developers, it is going to be problematic for those that want to hold the property in their hands at much low tax rates. For the buyers and sellers of the properties in the premium areas like Richmond Town, this is very serious news. There is further news for the properties of over 50 lakh in valuation. They have an additional tax of 1 percent levied on them as TDS tax. The taxes become quite high when counted in all totality and there are strict rules in place for the payment of taxes in time.

The government is no longer ready to let go the revenues that it deserves. The holding of quality properties in the premium areas is going to prove very difficult in the city of Bangalore. The move is commendable for the growth of the city and the government. But this is going to be problematic for the land dealers assome radical changes are going on.

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