The Revised or New tax system for Land or Plots in Bangalore

The new stamp duty formation for large plots (urban) in Bangalore by Dept. of Stamps & Registration is effective from April 2017. It is applicable for the land transformed from agricultural to non-agricultural use. In addition to this, the government is getting more revenue; this movement will remind the value of land deals of people in premium areas.

Why the tax system changed?

Until March 2017, the government followed a simple stamp duty system for urban lands. Any plots sized up to 10,890 sq ft (0.25 Acre) were charging a stamp duty in sq ft basis of the plot. Though, undeveloped plots above 10,890 (10 guntas) sq ft attracted stamp duty rates applicable to agricultural land, not considering the current status.

“This motivated several developers and individual owners to purchase agricultural land, apply for the change and keep it undeveloped in order to enjoy the benefits of low stamp duty rates applicable for agricultural land. Moreover, once a developer shaped layouts on that land, the obtainable single Khata of that land will divided into multiple Khatas, which the government had no account of. Thus, in order to ensure fair and timely payment of taxes, the government had to ensure a system where the land owner was made liable to pay taxes as soon as they apply for change to non-agricultural use, irrespective of the date when it was actually developed.

What’s the new tax system?

The government has now introduced five slabs with fixed rates for different sizes of plots. The value will also depends on the nature of the land ranging from residential, industrial or commercial. The percentage of area measured to compute stamp duty will drop as the total size of land increases. For example, the stamp duty rates for plots measuring between 5445 sq.ft to 8168 sq.ft will now be assessed at 70% of the current market rate for sites or of farm lands in the area, whichever is higher. Similarly, 10-20 guntas at 40%, 20-40 guntas at 35% and one acre and above at 30%.

Impact on Land rates

“The new tax structure would make land owners legally responsible to pay property taxes in time, thus makes it difficult for them to hold land for a long time at lower tax rates. This would specifically touch buyers or land owners at premium areas such as Richmond Town where the market value is as high as Rs 15-20K per sq.ft.

In addition, land costing higher than Rs 50 lakh also attracts an additional TDS of 1%. In general, the cumulative taxes and their timely payment would make it expensive for land buyers to now hold properties in premium areas. While the movement is beneficial for the government’s treasury and city’s planned development, it might have take a long time to start impacting on the cost of land at the ground level but helps.

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