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Bangalore pays second highest direct taxes in the country

According to the new RBI report on Municipal Finances in India, as indexed in the recent Budget speech of BBMP, Municipal finances of Bangalore rank very low. What is startling is that even tough we pay the second highest share of direct taxes (i.e personal taxes like what you and me pay out of our salary), it has no correlation with the per capita municipal tax.
According to this report from 'Economic Times':
"It may not be the best of times for IT professionals of Bangalore, but the cyber city has nevertheless overtaken Delhi in terms of total collection of personal income-tax, an indicator of economic growth of a city. According to Central Board of Direct Taxes (CBDT) figures (till March 25, 2008) income-tax collections in Bangalore stood at Rs 11,500 cr against Rs 10,400 cr in Delhi."
If BBMP is allocated atleast 10% of our direct taxes every year, it would give a huge boost to our municipal finances and enable BBMP to invest more in civic amenities / health care / education / infrastructure etc etc....
Naveen's picture

Interesting Stuff !

Thanks for the Update - today, we are the 2nd highest income-tax paying city, though in population, we may be 5th.

This empahsies the success story of the city with it's many high tech & research companies.

Subir Roy, a long time

Subir Roy, a long time resident of Bengaluru and a columnist at 'Business Standard' writes about how BBMP mismanages it's finances:

But then, the blame can be placed partially on residents as well. Even tough real state prices, direct taxes per capita, are among the highest in the country, we, the citizens of bengaluru do not pay proportionate property taxes.

If we oppose property taxes, then how can we expect good infrastructure? 

silkboard's picture

Compare it

I too read Subir roy's article with great interest (I am a Biz-Standar fan in general). I was hoping Mr Roy would do a comparison of BBMP and a similar non metro city like Pune or Hyderabad. Comparisons like that should tell us what BBMP is not collecting from us are not collecting well enough. Let us look around on Hyd (GHMC) website and try such comparison.
Naveen's picture

Great article by Subir Roy &

Great article by Subir Roy & cud'nt agree with him more.

I wonder why we in Begaluru

I wonder why we in Begaluru cannot go in for a city administration on the model of Chennai. Since the model serves them well, there is no reason to believe that it cannot be replicated in Bengaluru.

s_yajaman's picture

Petrol cess and parking tax?

It seems that infrastructure in Bangalore is synonymous with flyovers and elevated roads..  The whole development agenda has been focused on car owners and their needs. 

Dr.Subramanya commented that to fund all the infrastructure projects more money would be needed and thus property taxes would need to be hiked. 

I would say that we need to put a cess on petrol (Rs.5/liter).  There are 4 lakh cars and 15 lakh two-wheelers in Bangalore.  Let us say that each car uses 1 liter/day and each two wheeler uses 1/4 liter a day.  That makes it a total of about 250 million liters a year.  A Rs.5 cess would yield Rs.150 crores each year. 

Second, put an annual parking tax of Rs. 5000/car and Rs.1000/bike.  That will yield another Rs.350 crores.   This is the equivalent of paying Rs 15/day for car parking and Rs. 3/day for bike parking - not much.

This amount (Rs.500 crores) should go into an infrastructure fund and be used to improve the road infrastructure.  

BBMP's other funds should go to improve other stakeholders' lives (schoolchildren, patients at the govt hospitals, homeowners, etc).  These are being neglected today.


BTW - I just found this link

that said that Bangalore uses about 8 lakh litres per day or about 280 million litres/year.  Close to my estimate :)


Drive safe.  It is not just the car maker which can recall its product.

s_yajaman's picture

also a reflection on

It is also a reflection on how many salaried people there are in Bangalore.  Income tax collection depends on not just income but also compliance.  Compliance is easiest with salaried people.

Imagine if all our IT companies payed some income tax as well. 

There is a principle in the Indian tax system - no quid pro quo.  It means that we cannot demand benefits worth the tax we pay. 

Would be interesting to see how much Salex Tax Bangalore accounts for.



Drive safe.  It is not just the car maker which can recall its product.

tsubba's picture

Subir Roy's observations

Bangalore - Pathfinder to laggard
Subir Roy in Business Standard

The state of Bangalore’s civic body, BBMP, provides an object lesson on how not to run a city when the country is going through an unprecedented wave of urbanisation. This is tragic because the country’s IT capital has so much going for itself. It has no dearth of informed and engaged citizens and has the capability to generate as much of resources as it needs to make a showcase of itself. Instead, it wallows in a civic mess created by politicians who must rank among the worst south of the Vindhyas and self-serving bureaucrats.
The state of the city is reflected in the state of BBMP’s finances. Its budget presented last week may have created a record of sorts by missing its revenue target (budget versus revised estimates for 2007-08) by 62.5 per cent! This has not left it nonplussed as such underperformance is a regular feature. The budget document itself notes, “This (shortfall in receipts) has been the trend in BBMP over the last 10 years. The gap in some years is as high as 40 per cent.”
But past experience has not made the new team at Town Hall more cautious. For 2008-09 it has projected a massive revenue growth rate of 49.5 per cent. The key revenue earner, property tax, under-performed by Rs 180 crore in 2007-08 but has been again projected to go up by Rs 175 core in 2008-09. This is predicated on the state government notifying revised rules for the Sakrama scheme, which will regularise unauthorised constructions on payment of penalties. It has to do this quickly, before the model code comes into play ahead of the polling in May. Eventually it may not, leaving the politically sensitive issue to be sorted out by the next government. The future of a key revenue stream is so very uncertain.
Property tax revenue should shower on Bangalore, where IT-BPO expansion has created a real estate boom but its growth rate tells a tale. Property rates were revised after decades in the year 2000 and a system of self assessment by rate payers was introduced. Higher rates and the hassle-free system improved compliance and revenue boomed. But the rate of growth has come down lately. For a consideration, the civic staff have been “advising” rate payers how to assess themselves modestly. Scrutiny of self-assessments has almost ceased.

A key regulatory change has also critically deprived BBMP revenue from new developments. These have mostly taken place in newer areas around the city involving conversion of agricultural land to non-agricultural use. To put a stop to widespread construction on non-converted land, the state government ordered a couple of years ago that the “khata” or “mutation” (recording your right to pay property tax and the de facto claim to ownership) will not be allowed for property built on land not yet regularised. So a lot of new property owners have not been paying any tax at all! This “loophole” has now been removed and BBMP has lately been active bringing within its net new “high density” areas.
The change in Bangalore’s national status is best illustrated by its play with the JNNURM, designed to tackle the urban mess by offering funds against adoption of good practices. Karnataka, through Bangalore, was a pioneer in some of these like the fund-based system of civic accounting, which were adopted by the JNNURM for the whole country.
Two Bangalore citizens, Infosys Chairman Nandan Nilekani and the NGO Janaagraha’s founder Ramesh Ramanathan, played a key role in creating the programme. So when the JNNURM started, Bangalore got ready funding for having already adopted some of those good practices. But thereafter it fell behind even as some cities in other states forged ahead. One reason why revenue fell short in 2007-08 was JNNURM funding falling short because of missed reform milestones. The path finder has become the laggard.
The lack of effective political leadership is natural as the city has not had a popular local body for over a year now. When BMP was made BBMP by adding five peripheral municipalities, it was given a year to put its house in some shape before an elected body took over. Then came delimitation and redefining of urban ward boundaries and thereafter President’s rule. Not that just any elected body will change things. If it is business as usual, popular representation will mean the same least capable corporators will elect non-descript mayors every year. A mayor-in-council system and a heavyweight mayor, both directly elected by the people for five years, is what is needed to put power and responsibility in the same hands by aligning the rights to govern, spend and administer, instead of the current dissonance between the functions of the corporator, municipal commissioner and state government. (See Kasturirangan Committee's recomendations here.)
It being business as usual, modern ideas of urban renewal, with emphasis on walking, cycling, bus travel and mixed development (stay near to where you work) have barely reached Bangalore. The civic budget talks of underpass, overpass, elevated highway, and roads on stilts on dirty nullahs, which will apparently have special fences so people can’t dump garbage in the nullahs! A city where some of the business follows global best practices, urban governance follows some of the worst practices. Bangalore, which has put India on the global map, is being ruined by its politicians and bureaucrats. The politics of Deve Gowda and that of the bureaucrats who badmouthed and helped kill a remarkable public-private initiative like the Bangalore Agenda Task Force have been the city’s nemesis.

PS: original budget document here.

tsubba's picture

Being like chennai

They have thought about it already. Kasturirangan committee has given its recommendations. waiting for cabinet approval and some legislative changes. See recommendations here. If you have access to a copy of the report, please share.

ssheragu's picture

my only suggestion for

my only suggestion for copious and prolific tax collection is for the taxman to go to Avenue road and all business areas and to collect whatever tax is due from them


ssheragu's picture

Creation of Arterial Roads

Admin note: Srinath sir, your comment has been moved to the 'want corridors, not flyover' thread, since it seemed more appropriate there.

'The Hindu' article on per capita revenue of BBMP

According to a recent report of the Reserve Bank of India on municipal finances, the per capita revenue generation in Bangalore is only Rs. 810 compared to Rs. 3,417 of the Greater Mumbai Corporation, Rs. 1,890 in Pune, Rs. 2,344 in Nasik, Rs. 2,577 in Surat, Rs. 1,029 in Indore, Rs. 1,385 in Chennai, Rs. 1,178 in Kolkata and Rs. 1,233 in Baroda. Only Kochi with Rs. 858 comes close to Bangalore. The per capita revenue generation in New Delhi is Rs. 872, but the Delhi corporation receives special grants from both the Delhi Government and the Union Government. 

Naveen's picture

How far the city has bent

This denotes how much the city's revenue streams have been plagued by corruption & being exceesively accommodative to all classes. One visionary head for BBMP with a full term of 5 years & this can be reversed & corrected, but do we have such a candidtae ? comment guidelines

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