The Punjab government has proposed a significant increase in agricultural tax rates and water charges under the Punjab Finance Bill 2026, while also introducing relief measures aimed at supporting the province’s struggling cotton sector.
According to the proposed amendments to the Agriculture Income Tax Rules, agricultural land holdings of up to 12.5 acres will remain exempt from agricultural income tax.
However, farmers owning more than 12.5 acres of land will face higher tax rates. The government has proposed increasing the tax on landholdings above 12.5 acres and up to 25 acres from Rs. 300 per acre to Rs. 1,000 per acre.
Similarly, agricultural land ranging from more than 25 acres to 50 acres will also be taxed at Rs. 1,000 per acre, compared to the existing rate of Rs. 400 per acre. Landholdings exceeding 50 acres will continue to be taxed on a per-acre basis, with the rate rising from Rs. 500 to Rs. 1,000 per acre.
Higher Taxes on Orchards
The proposed budget also seeks to increase taxes on orchards. The tax on matured orchards has been raised from Rs. 600 per acre to Rs. 1,000 per acre.
Meanwhile, the tax on unirrigated orchards is proposed to increase from Rs. 300 per acre to Rs. 500 per acre.
New Flat-Rate Water Cess Proposed
The Punjab government has also proposed major changes to the water cess system by replacing the existing crop-based mechanism with a flat-rate structure.
Under the new proposal, water cess will be charged at:
- Rs. 1,650 per acre during the Kharif season
- Rs. 850 per acre during the Rabi season
The move is intended to simplify the collection system and improve revenue generation from irrigation services.
Relief for Cotton Sector
Despite the proposed tax increases, the government has announced relief for the agriculture sector by proposing the abolition of the cotton fee currently charged on the arrival of raw cotton at ginning factories.
Officials said the cotton industry has faced severe challenges in recent years due to declining production, leading to the closure of several ginning factories, particularly in South Punjab.
The removal of the cotton fee is expected to reduce costs for stakeholders, support the revival of the cotton sector, and encourage greater agricultural activity across the province.
