Provinces to implement new agricultural income tax rates by next year, says finance minister

Legal amendments required by January 2025; confusion arises over national fiscal pact timeline

Finance Minister Muhammad Aurangzeb said that provinces will begin collecting agricultural income tax at new rates starting in the next fiscal year, 2025-26. 

He stated that provincial governments must amend their respective agricultural tax laws by January 1, 2025, to implement the new rates, with collections set to begin on July 1, 2025.

The finance minister’s remarks come amid resistance from provinces, particularly Sindh and Punjab, which are reportedly reluctant to introduce new tax measures that could impact their landlord legislators, especially during a period of growing political uncertainty.

However, there appears to be some confusion regarding the timeline, as the National Fiscal Pact—signed by all four provinces—stipulates that agricultural income tax regimes must be aligned with federal personal income and corporate tax structures by the end of October. 

The pact suggests that taxation under the new regime should commence on January 1, 2025, with collections for the second half of FY2024-25’s agricultural income beginning in July 2025.

The minister’s statement indicates that the new tax rates for farmers and landlords will be enforced from the next fiscal year, aligning with federal income tax structures, which currently reach up to 50% for personal income and 29% for corporate income.

The federal government also appears to be reconsidering two key fiscal initiatives—taxing retailers and increasing property valuation rates—that were initially aimed at raising an additional Rs90 billion this fiscal year. 

While there has been little progress on these initiatives, the salaried class has continued to bear the brunt of higher taxation.

Monitoring Desk
Monitoring Desk
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