Punjab Proposes Major Increase In Agriculture Taxes

The Government of Punjab has proposed substantial amendments to agricultural taxation and irrigation charges through the Punjab Finance Bill 2026, introducing significant increases in agriculture income tax rates and revising the existing Abiana framework as part of broader efforts to enhance provincial revenues and expand the tax base.

Under the proposed legislation, a uniform agriculture income tax of Rs1,000 per acre will be imposed on agricultural landholdings exceeding 12.5 acres. The proposal represents a major departure from the current slab-based system, under which varying tax rates apply according to the size of landholdings.

Presently, agriculture income tax is levied at Rs300 per acre on holdings ranging from 12.5 to 25 acres, Rs400 per acre on holdings between 25 and 50 acres, and Rs500 per acre on holdings exceeding 50 acres.

As a result of the proposed restructuring, landowners holding between 12.5 and 25 acres would face an increase of approximately 233.33%, while holdings between 25 and 50 acres would experience a 150% increase. Agricultural holdings exceeding 50 acres would be subject to a 100% increase in the applicable per-acre tax rate.

The bill also proposes revisions to taxation applicable to orchards. The agriculture income tax on irrigated orchards is proposed to increase from Rs600 per acre to Rs1,000 per acre, while the tax applicable to non-irrigated orchards would rise from Rs300 per acre to Rs500 per acre.

In addition to changes in agricultural taxation, the provincial government has proposed a comprehensive restructuring of the Abiana system by replacing the existing crop-based methodology with a uniform acreage-based charging framework.

Under the revised structure, irrigation water charges would be fixed at Rs1,650 per acre during the Kharif season and Rs850 per acre during the Rabi season, irrespective of the crop cultivated.

The bill further proposes an annual irrigation surcharge of Rs2,000 per acre for approved orchards. In addition, water supplied through government-operated or privately managed lift irrigation schemes would be subject to an annual charge of Rs2,250 per acre.

The proposed measures form part of the province’s broader revenue mobilisation strategy. For FY2026-27, the Punjab government has established an overall tax collection target of Rs748.70 billion, representing an increase of approximately 42.69% compared with the previous target of Rs524.70 billion.

Alongside the proposed revenue-enhancing measures, the bill contains targeted relief for the cotton sector. The government has proposed the abolition of the cotton fee imposed under the Punjab Finance Act, 1973.

Accordingly, the seasonal levy applicable to raw cotton transported to ginning factories would be eliminated. The proposed relief has been justified on the basis of persistent declines in cotton production and the closure of a substantial number of ginning facilities across the province in recent years.

The proposed reforms indicate the provincial government's intention to strengthen revenue generation through agricultural taxation while simultaneously providing sector-specific relief aimed at supporting the revival of Punjab’s cotton industry.