KP govt introduces agricultural income tax bill in provincial assembly

PESHAWAR: The Khyber Pakhtunkhwa (KP) government has decided to impose an agricultural income tax across the province and has introduced the proposed legislation in the provincial assembly. The draft, titled the Khyber Pakhtunkhwa Agricultural Income Tax Bill 2025, will take effect from January 1, 2025, if approved.

According to the proposed bill, an annual agricultural income of Rs6-12 lakh will be taxed at 15 percent, while incomes between Rs12-16 lakh will face a 20 percent tax. Agricultural income ranging from Rs16-32 lakh will be taxed at 30 percent.  

For annual incomes of Rs32-56 lakh, the bill proposes a 40 percent tax, while incomes exceeding Rs56 lakh will face a 45 percent tax rate. Additionally, individuals earning over Rs15 crore annually from agriculture will be subject to a super tax. Landowners with holdings across multiple patwar circles must submit details of their land’s location, along with an agricultural income tax return.  

The draft bill further recommends applying an annual agricultural tax to 50 acres of cultivated land or more than 100 acres of uncultivated land. In the event of a company’s dissolution or a landowner’s death, the heirs will be responsible for clearing outstanding agricultural taxes and dues.  

The Board of Revenue will oversee tax collection by dividing districts and tehsils into various zones. Individuals failing to pay agricultural income tax without valid reasons will face a daily penalty of 0.1 percent imposed by the collector.  

The new legislation categorizes agricultural land into four zones for tax purposes. In Zone One, land exceeding 12.5 acres and up to 25 acres will incur a tax of Rs1,200 per acre. Zone Two will impose Rs900 per acre on similar holdings, while Zone Three will tax land at Rs500 per acre. Zone Four exempts holdings up to 12.5 acres from taxation, but land between 12.5 acres and 25 acres will incur a tax of Rs300 per acre. Farmers will also be required to pay agricultural tax under the proposed framework.  

Corporate farming will also be brought under the tax net. Small companies will face a 20 percent annual agricultural income tax, while large companies will be taxed at 29 percent.  

The authorities said that the comprehensive bill aims to enhance revenue collection through structured taxation of agricultural incomes and holdings across the province.