Property Tax Inflation
It has been slightly over 10 years since we moved to the home we currently reside in. So I thought we should have enough information to calculate the property tax inflation. Why not write a short post about it? In the past I have written a few articles covering inflation of various material goods we posses. This is one more of them. Remember that calculating inflation of individual items like this does not make much sense unless the expense is a major part of your annual expense. For example, if the inflation of the price of a pen is 20% but the price of the pen is Rs. 20, it does not matter how big or small the inflation is, it will not affect your total inflation (for a long time) because Rs. 20 is such a small amount compared to your annual expense. I am calculating inflation just as a fun exercise.
It all started when I paid my property tax a couple of days ago. I noticed that the property tax has increased by 50% compared to what I paid last year. I was a bit surprised because the hike was unusually high. I don’t generally read local news, which I know I should, but that is a story for another day. There are a lot of things that are wrong with me, but I am not too concerned about changing most of them :). Anyway, at this point I started searching for news articles explaining changes to property tax in Bangalore. I found a few articles which explained that BDA (Bangalore Development Authority) has started levying maintenance tax.
The tax varies anywhere between Rs. 1,200 to Rs. 3,600. In fact it seems like the tax was supposed to have been added last year, but somehow when I paid my property tax, the maintenance tax did not show up. Perhaps the reason could be that this tax came into effect later in the year and I always pay property tax as soon as possible in the new financial year.
So they added the maintenance tax retrospectively and charged it as “Arrears” in the current tax year. As a result, I had to pay maintenance tax of last year as well as for this year which is the reason for the huge 50% hike in tax this year. I am grateful that they did not charge interest or penalty for the arrears most likely because the tax came into effect a bit later in the financial year. So the effective hike was 25% and not 50% really.
Now to calculate my property tax inflation with this information. There have been two instances when the property tax has been raised since we started paying in 2012. One was in 2016 and the hike was 20%. Another hike was in 2021 for about 25%. So after 10 years the inflation turned out to be 4.1%. Not bad, but as I mentioned before, the amount is so small compared to my annual expenses, that this inflation really does not influence my overall inflation by much. I am just tracking various inflations for fun. What is important is that the inflation is still lower than the inflation of 6% that I have used when calculating my retirement numbers.