Councillors agreed to increase the rate by 2.9% for the 2022/23 financial year, putting the band D rate at £1419.03.
Total savings of £8.9million were also made in order to set a revenue budget of more than £390m.
The new rates for the next year will be as follows: Band A £946.02, Band B £1,103.69, Band C £1,261.36, Band D £1,419.03, Band E £1,864.45, Band F £2,305.92, Band G £2,778.93, Band H £3,476.62.
Council tax provides around 18% of the council’s income. Almost three quarters (72%) of households in Dundee are in Bands A, B or C.
Explaining the increase, Councillor Willie Sawers, the council’s depute policy and resources convener and finance spokesman, said that the decision had been made in direct response to the Covid-19 pandemic.
He also pointed out that this will be just the fifth Council Tax increase in almost 15 years.
He said: “No-one can be unaware of the unprecedented circumstances surrounding the setting of this budget, which has been influenced by the same global pressures that have squeezed household finances in the past 12 months.
“In the last 14 years the council tax in Dundee has only been put up five times and this increase is as restrained a response as we could make to the substantial economic impact of the pandemic, the effects of which are going to be with us for years to come.
“The new council tax rate means that we can continue to provide resources to deliver the city’s priorities and look to the future by developing and further enhancing our services.”
Mr Sawers also said that the rise will allow additional funding to be allocated to support the work of the drug commission, mental health and climate change, while at the same time improving support for people in the city who are experiencing all forms of poverty.
He added: “Covid-19 and its long-lasting legacy have contributed to the considerable challenges the city was already tackling, but Dundee’s reputation as a well-run, high performing, award-winning and ambitious local authority that delivers best value for our communities remains intact.”