Provinces miss IMF deadline for agri tax legislation, Punjab approves draft bill

The four provincial governments still need to complete the International Monetary Fund (IMF) deadline to pass new laws increasing the agricultural income tax rate to 45% by the end of October. 

According to IMF documents, each province was expected to amend its agricultural tax legislation to align it with the federal tax structure, applying the federal personal income tax regime to small farmers and the corporate tax regime to commercial agriculture by the end of October. 

The move was meant to enable tax collection from January 1, 2025. However, lack of full cooperation from the provinces has hindered compliance with IMF conditions.

While Punjab has taken the lead with its cabinet’s approval of the Punjab Agricultural Income Tax (Amendment) Bill 2024 on October 30, the law has yet to pass through the provincial assembly. 

Khyber-Pakhtunkhwa (K-P) is also advancing its legislation, with its cabinet scheduled to review the Agriculture Income Tax Bill next week. 

The proposed tax rates suggest a scaled approach: individuals earning between Rs600,000 and Rs1.2 million annually will pay a 15% income tax, while those earning above Rs5.6 million will be taxed at 45%. 

Super tax rates will vary from 1% on incomes over Rs150 million to 10% on incomes exceeding Rs500 million.

The bill also proposes annual land taxes ranging from Rs500 to Rs3,500 per acre and grants provincial authorities the right to review a farmer’s tax return for up to four years, compared to the current two-year limit. 

Non-compliance will attract daily penalties, starting from Rs10,000 and reaching Rs50,000 for incomes above Rs40 million.