The Punjab government has unveiled a series of tax reforms for the agriculture sector in its Finance Bill 2026, proposing substantial increases in agricultural income tax and irrigation charges. The measures are part of a broader strategy to strengthen provincial revenues and expand the tax base.
Under the proposed legislation, agricultural landowners with holdings exceeding 12.5 acres will be subject to a uniform agricultural income tax of Rs1,000 per acre. This marks a significant shift from the current tiered system, where tax rates vary according to the size of landholdings.
At present, landowners cultivating between 12.5 and 25 acres pay Rs300 per acre, while those owning between 25 and 50 acres pay Rs400 per acre. Holdings larger than 50 acres are taxed at Rs500 per acre. If approved, the new rate would translate into tax increases ranging from 100 percent to over 233 percent, depending on the size of the farm.
The government has also proposed higher taxes on orchards. The levy on irrigated orchards is set to rise from Rs600 to Rs1,000 per acre, while non-irrigated orchards would see their tax rate increase from Rs300 to Rs500 per acre.
In another major policy change, Punjab plans to replace the existing crop-specific Abiana system with a flat-rate structure for irrigation water charges. Farmers would pay Rs1,650 per acre during the Kharif season and Rs850 per acre during the Rabi season, regardless of the crop being cultivated.
Additional charges have also been introduced for orchard owners and users of lift irrigation systems. Approved orchards would face an annual irrigation charge of Rs2,000 per acre, while water supplied through government or private lift irrigation schemes would be taxed at Rs2,250 per acre each year.
These proposals are aligned with the province’s ambitious revenue goals. The Punjab government has set a tax collection target of Rs748.7 billion for the upcoming fiscal year, representing an increase of nearly 43 percent compared to last year’s target of Rs524.7 billion.
Despite the proposed tax hikes, the Finance Bill includes some relief measures for the agricultural sector. Notably, the government has recommended abolishing the cotton fee imposed under the Punjab Finance Act, 1973. The seasonal charge on raw cotton delivered to ginning factories would be eliminated in response to declining cotton production and the closure of numerous ginning units across the province.
The proposed reforms are expected to generate debate among stakeholders. Supporters argue that the measures will help improve fiscal sustainability and ensure greater contribution from larger agricultural landowners. Critics, however, contend that rising taxes and irrigation costs could place additional pressure on farmers already dealing with increasing production expenses.
As the Finance Bill moves through the legislative process, farmers, industry representatives, and policymakers will closely watch whether these proposals are approved in their current form or revised following consultation and debate.