LAHORE:The provincial government has realigned agricultural income tax (AIT) rates with the Federal Board of Revenue (FBR) tax rates for businesses, ensuring equal tax treatment across sectors, according to budget documents.
“The rates of agricultural income tax shall be specified in the schedules appended to the Rules ibid The BE for AIT for FY 2025-26 is set at Rs10.5 billion which is 200% higher than the BE of FY 2024-25”, as per budget documents. The amendments in the related Act and relevant Rules have been duly made, with implementation starting in FY 2025-26, official document adds. Agricultural Income Tax is an important Direct Tax of the Province, collected under the Punjab Agriculture Income Tax Act of 1997. It is levied as a fixed amount per acre of land, or as a percentage of income of owners of agricultural land, whichever is higher.
However, according to Budget documents, as part of structural benchmark under International Monetary Fund’s (IMF) Extended Fund Facility, to align AIT rates with FBR tax regime, the necessary legislative changes in the Punjab Agricultural Income Tax Act, 1997 have been made through the Punjab Agricultural Income Tax (Amendment) Act, 2024 by the Provincial Assembly of the Punjab, duly notified on 27th Nov., 2024 and subsequent amendments in Punjab AIT Rules 1997 and 2001, duly notified on 6th March, 2025.
The key amendments made through the Punjab Agricultural Income Tax (Amendment) Act, 2024 and the relevant Rules include alignment of Agriculture Income Tax with FBR income / taxation slabs, the income-based AIT rates for farmers have been proposed to be aligned with FBR tax rates for business individuals, definition of company has been added to charge corporate tax rates on commercial agriculture sector.
More importantly, a super tax on high earning persons has been imposed. The penalty for non-filing of return and default surcharge for non-payment of tax have been enhanced, as per budget documents. It may be noted that the Punjab government also enhanced target for Agriculture Income Tax for the fiscal year 2024-25. The budget estimate for AIT for FY 2024-25 was set at Rs3.5 billion which is 22.8 percent higher than the budget estimate of FY 2023-24. The budget estimate 2023-24 was fixed at Rs2.85 billion while revised estimate 2023-24 was Rs3.50 billion. The rates of land based AIT were earlier last revised in 2019.
It may be recalled that Board of Revenue made significant progress towards automation of databases including land records and girdawari (bi-annual assessment of crops and production). The government will ensure that the mechanisms for proper maintenance and updating of these databases are institutionalised. BOR has earlier been mandated to take the actions necessary to include payment of AIT through the E-pay system of the government, which is already implemented for several taxes.
