The Karnataka Apartment (Ownership and Management) Act, 2026 — What the Accounts Desk of Every Apartment Association Must Know

Karnataka has replaced two 50-year-old apartment laws with one new Act. For the treasurer, the accountant and the managing committee of an apartment association, this is not only a legal change — it changes how maintenance is billed, how dues are recovered, how books are kept and when accounts must be filed. This article explains the Act from the point of view of the accounts desk.

This article is for general information only and is not legal advice. Please refer to the bare Act and the Rules, once notified.

Where the law stands today

The Act is passed and notified, but it has not yet come into force. Under section 1(2), it will apply only from the date the State Government notifies in the Official Gazette.

Date	Event
15 July 2026	Draft Bill released for public consultation
19 August 2026	Introduced in the Legislative Assembly as LA Bill No. 14 of 2026
21 August 2026	Passed by the Legislative Assembly
24 August 2026	Passed by the Legislative Council
9 October 2026	Assent of the Governor
15 October 2026	Published in the Karnataka Gazette as Karnataka Act No. 45 of 2026
Awaited	Commencement notification, Rules, model bye-laws and forms

On commencement, section 66 repeals the Karnataka Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1972 and the Karnataka Apartment Ownership Act, 1972, with savings for actions already taken and proceedings already pending.

Who is covered

The Act applies to projects having more than eight apartments in one or more buildings, including villas and row houses forming part of a single plot or development plan approval, and projects in layouts approved under section 17 of the Karnataka Town and Country Planning Act, 1961 [Sec 1(3)].

It does not apply to Government buildings, buildings retained under single ownership and only let out, and plotted or villa developments individually conveyed where roads, parks and civic amenities are handed over to the local authority. This exemption is lost where the development has common areas or facilities managed by the owners through an association [Sec 1(4), 1(5)]. In practice, almost every apartment complex and gated community in Bengaluru will be covered.

1. One project, one association

Every project must have a single registered association — a body corporate with perpetual succession and a common seal, which can hold property and sue and be sued in its own name [Sec 21(5), 21(6), 22(4)]. Each member has one vote, irrespective of the number of flats held [Sec 21(7)].

• No new society or co-operative: fresh registration of an apartment association under the Karnataka Societies Registration Act, 1960 or the Karnataka Co-operative Societies Act, 1959 is barred [Sec 22(5)].

  
  

• Existing bodies are deemed associations: associations already registered as societies, co-operatives, under the 1972 Apartment Ownership Act or under the Companies Act, 2013 are deemed to be associations under the new Act. Multiple associations in one project must merge [Sec 22(6)].

  
  

• Six months to align: existing associations must furnish particulars to the Competent Authority and bring their bye-laws in line with the model bye-laws within six months of commencement [Sec 22(7)].

  
  

For associations registered under the Karnataka Societies Registration Act, 1960, this is a real shift. Under that Act, the annual list of governing body members and the audited balance sheet are filed with the Registrar of Societies within 14 days of the AGM [KSR Act, Sec 13]. Under the new Act, the audited accounts go to the Competent Authority instead.

Accounts action: once the Rules are notified, check how the PAN, bank account mandates, GST registration and TAN of the existing society will carry over to the deemed association. Keep the general body resolution, member register and last audited accounts ready.

2. Builder handover — the money must follow

Within 60 days from the Occupancy Certificate, the promoter must transfer to the association all funds collected from buyers towards maintenance deposits, security deposits, corpus fund, advance maintenance and other common-area charges, together with interest accrued, along with an audited statement of accounts showing project-wise and allottee-wise details [Sec 16(1)(c)].

The promoter must also hand over records such as receipts of municipal taxes paid up to handover, insurance policies, AMC contracts, warranty documents and building drawings [Sec 16(1)(b)]. The transfer of management does not transfer ownership — the land and common areas remain owned by the apartment owners in proportion to their undivided share [Sec 10(3)].

Two more points matter for the books:

• The promoter is a member for every unsold flat and must pay maintenance on it like any other owner [Sec 21(8), 25(6)].

  
  

• Even after handover, the promoter remains liable under RERA for structural defects during the defect liability period [Sec 10(8), 21(13)].

  
  

Accounts action: prepare an allottee-wise reconciliation of corpus and deposits paid to the builder (from sale agreements and receipts) against what is actually transferred. Raise any shortfall in writing. Start billing unsold units from day one in a separate promoter ledger.

3. Maintenance charges — billed by Super Built-up Area

Maintenance charges are to be apportioned in proportion to the super built-up area (SBA) of each apartment relative to the total SBA of all apartments [Sec 2(t), 25(2)(a)]. Amounts for special services or usage availed by a particular flat can be charged separately as per the bye-laws. Apartments having the same area and use cannot be charged differently, unless the difference arises from actual usage [Sec 9 proviso].

The Act defines the areas step by step:

• Private area = carpet area (as per RERA) + external walls and exclusive balcony + 33% (or the percentage in the title deed) of any terrace, lawn or open space conveyed with the flat [Sec 2(cc)].

  
  

• Super built-up area = private area + proportionate share of the built-up common areas, shared in the ratio of private areas [Sec 2(hh)]. The break-up must be shown in every agreement of sale and sale deed.

  
  

• Undivided share in land is also in the ratio of private areas [Sec 3(2), 11(2)].

Worked on the Act's own illustration, assuming monthly common expenses of ₹42,000:

Particulars	Flat A	Flat B	Total
Private area (sq m)	130	150	280
Share of built-up common area (sq m)	65	75	140
Super built-up area (sq m)	195	225	420
Monthly maintenance (₹)	19,500	22,500	42,000

A point to watch: section 9 says common expenses are to be borne in proportion to private area, while sections 2(t), 25(2)(a) and 30(3) use super built-up area. Since built-up common area is itself shared by private area, the ratios will often be the same — but not always (for example, in mixed-use projects). Follow the bye-laws and the Rules, and record the basis in a general body resolution.

Accounts action: build an area master for every flat — carpet area, private area and SBA — from the registered sale deeds. Billing, voting percentages and the undivided share all depend on it.

4. Late payment, interest and penalty

The bye-laws must specify the due date, manner of payment and rate of interest or penalty, within the upper limit to be prescribed [Sec 25(2)]. Two limits apply straight away:

• The penalty for non-payment cannot exceed one month's maintenance charge of that apartment.

  
  

• Penalties collected must be credited to the common capital of the association, not spent as general income [Sec 25(2) provisos, 36(5)].

  
  

Penalties for breach of bye-laws carry the same one-month cap, and can be imposed only after notice and a reasonable opportunity of being heard. An aggrieved owner can appeal to the Competent Authority [Sec 36].

5. The recovery ladder

• Charge on the flat: unpaid maintenance, common expenses, user charges, interest and penalty are a charge on the apartment and its undivided share [Sec 20(1), 25(7)]. This charge ranks after Government and municipal taxes, statutory dues and a prior registered mortgage [Sec 25(7) proviso].

  
  

• Restrict non-essential facilities: for persistent defaulters, after due notice, the association may restrict facilities such as the club house or gym, as specified in the bye-laws [Sec 20(6)].

  
  

• Essential services cannot be stopped: water, electricity, sanitation, lifts, fire safety and access to the flat can never be withheld [Sec 20(6) proviso]. The old Flats Act made such stoppage a cognisable offence [KOFA, Sec 13]; the principle continues.

  
  

• Competent Authority: the association may apply to record a charge, within two years from the date the dues became payable [Sec 26(1), 26(4)]. The Authority may order payment with interest and costs [Sec 20(7)].

  
  

• Recovery: amounts under the Authority's order can be recovered as arrears of land revenue or property tax [Sec 41(6)]. Where the owner is not in occupation, maintenance can be recovered from the tenant or occupier, without affecting the owner's liability [Sec 25(4)].

On sale of a flat: on request, the association must issue a certificate of unpaid dues, and that certificate is conclusive against the association [Sec 20(5)]. Issue it only after a full ledger check, including interest, user charges and special levies. The buyer is jointly and severally liable with the seller for dues up to the date of transfer [Sec 20(4)], and a buyer who pays old dues may recover them from the seller [Sec 27(3)].

6. Accounts and audit — Section 28

Section 28 is the core mandate for the finance function:

1. Bank account: all maintenance charges, security deposits, advance maintenance, contributions and other funds must be deposited in an account in the association's name with a Scheduled Bank (Second Schedule to the RBI Act, 1934) [Sec 28(1)].

   
   

2. Fund-wise accounts: separate bank accounts may be kept for the maintenance fund, common capital fund and other funds, operated as per the bye-laws [Sec 28(2)].

   
   

3. Books: a Receipts and Payments Account, an Income and Expenditure Account and a Balance Sheet for every financial year, with other prescribed records [Sec 28(3)].

   
   

4. Taxes: the association is responsible for all taxes and statutory dues on the common areas and its activities [Sec 28(4)].

   
   

5. Audit: annual audit by a Chartered Accountant or other qualified auditor as prescribed [Sec 28(5)].

   
   

6. Filing: the audited statement of accounts must be submitted to the Competent Authority within six months from the end of the financial year — that is, by 30 September for an April–March year [Sec 28(6)].

   
   

7. Default: delay can attract a penalty on the association or the executive committee [Sec 28(7)].

   
   

8. Surplus: any surplus can be used only for purposes specified in the Act or the bye-laws [Sec 28(8)].

7. Moving to fund accounting

The definitions in section 2 point clearly to fund-based accounts. A practical structure:

Fund	What goes in	What it pays for	Reference
Maintenance fund	Monthly maintenance charges	Operation, repair, upkeep, administration, insurance premium	Sec 2(k), 2(t), 29(4)
Common capital	Capital contributions, penalties, proceeds from outside use of facilities	Creating, upgrading, replacing or renovating common assets	Sec 2(j), 12(4), 25(2), 36(5)
Corpus and deposits	Amounts received from the promoter, with interest	As decided by the general body and bye-laws	Sec 16(1)(c)
Common profit	Rent and income from common areas, less common expenses	Belongs to all owners collectively	Sec 2(l), 9

Keep the promoter's dues for unsold flats, user charges for community facilities and special levies in separate ledgers, so that the dues certificate under section 20(5) can be issued with confidence.

8. Insurance, major repairs and structural audit

• Insurance: the association must insure the property, including common areas, against fire, flood and other risks, and take public liability, occupier's liability and employer's liability cover. Policies are in the association's name as trustee for the owners, and the premium is a common expense [Sec 29].

  
  

• Major repairs: where cost exceeds available funds, approval by a majority of owners present and voting in a general body meeting, with a quorum of at least 50% of owners. The cost is a common expense shared by SBA [Sec 30(1)–(3)].

  
  

• Emergency repairs: the executive committee may act immediately, but must record reasons and place the work and expenditure before the next general body for ratification [Sec 30(8)].

  
  

• Owner-caused damage: the owner must repair within 5 days (minor) or 30 days (major); otherwise the association may repair and recover the cost [Sec 30(6), 30(7)].

  
  

• Structural audit: compulsory after 30 years from construction, and then at least once every 5 years [Sec 31]. Build a sinking fund for this from today.

  
  

9. Governance that affects the finance desk

• Executive committee term: not more than two years; a member who has served two consecutive terms cannot stand for the next term [Sec 23(3), 23(4)]. Expect frequent change of treasurers — standard accounting policies, a written handover checklist and cloud-based books become essential.

  
  

• Bye-laws must cover financial management: funds, books of account, audit, collection of maintenance and capital contributions, and penalties [Sec 35(1)(iii), (vi)].

  
  

• Amending bye-laws: two-thirds of members present and voting, with a quorum of one-third of total members, and approval of the Competent Authority (deemed approved if not decided in 30 days) [Sec 34].

  
  

• Liability of the committee: the executive committee is responsible for negligence limited to the functions and duties assigned under the Act [Sec 24(5)].

  
  

10. Redevelopment and penalties — the big-ticket items

• Redevelopment: needs written consent of owners of at least 75% of the apartments and approval of the Second Appellate Authority [Sec 48(3)]. An owner who does not consent may opt for a monetary settlement of not less than two times the market value, less depreciation, determined by a registered valuer — payable by the association [Sec 48(6)]. The promoter must furnish a bank guarantee or escrow before demolition [Sec 48(9)].

  
  

• Penalties [Sec 52]: for an association or owner, up to ₹20,000 per contravention plus up to ₹1,000 per day of continuing contravention. For promoter defaults (declaration, association formation, deed of transfer, possession without OC), up to ₹1 lakh plus up to ₹1,000 per day.

  
  

11. The tax overlay

Section 28(4) makes the association responsible for all taxes and statutory dues. The new Act does not change tax law, but the accounts desk must connect the two.

Area	Position	Accounts tip
GST	Contribution up to ₹7,500 per month per member per flat is exempt. If it exceeds ₹7,500 and aggregate turnover exceeds ₹20 lakh, GST at 18% applies on the full amount; ITC on capital goods, goods and input services is available.	SBA-based billing can push larger flats above ₹7,500 — check before fixing the rate.
TDS	From 1 April 2026, the Income-tax Act, 2025 applies. TDS on contractors, professionals and rent is now under section 393 (earlier sections 194C, 194J and 194-I).	Use the correct section 393 table entry and payment code in challans and returns.
Income tax	Member contributions are generally covered by the principle of mutuality; interest on bank deposits and income from outsiders is generally taxable.	File the return of income on time; reconcile TDS on interest with the annual tax statement.

12. Ten-point readiness checklist

☐ Track the commencement notification, Rules and model bye-laws

☐ Build an area master — carpet, private and super built-up area of every flat

☐ Review the billing basis in the bye-laws and pass a general body resolution

☐ Fix the interest and penalty policy within the limits

☐ Open fund-wise accounts in a Scheduled Bank

☐ Reconcile promoter handover funds, allottee-wise

☐ Fix the audit calendar — audited accounts filed by 30 September

☐ Review insurance — property, public, occupier's and employer's liability

☐ Start a sinking fund for major repairs and structural audit

☐ Review GST, TDS and income-tax compliance

Conclusion

The new Act gives apartment associations a stronger legal identity, a clear charge on flats for unpaid dues and a quicker forum for disputes. In return, it asks for more financial discipline — proper fund accounting, an annual CA audit and timely filing with the Competent Authority. Associations that prepare now will find the transition smooth once the Act is brought into force.

For help with association accounts, audit coordination, GST and income-tax compliance, contact Anjanadri H R — Business & Tax Consultants, Bengaluru · www.anjanadrihr.com.

Sources

• Karnataka Apartment (Ownership and Management) Bill, 2026 — LA Bill No. 14 of 2026, as passed by the Legislative Assembly (PRS copy)

• Fox Mandal — Karnataka notifies Apartment (Ownership and Management) Act, 2026 (16 October 2026)

• Karnataka Ownership Flats Act, 1972 (Act 16 of 1973) and Karnataka Societies Registration Act, 1960 (Act 17 of 1960)

• CBIC clarification on GST for RWAs, as reported by Business Standard

• Income-tax Department FAQ — TDS under the Income-tax Act, 2025