In a significant move, the Khyber Pakhtunkhwa (KP) Assembly has approved the Agricultural Income Tax Bill 2025, which is set to reshape the taxation landscape for agricultural income in the province. The bill, which will take effect retroactively from January 1, 2025, aims to impose taxes on agricultural income above specific thresholds and applies to both cultivated and uncultivated land in the region.

Key Features of the Agricultural Income Tax Bill 2025

Under this new legislation, agricultural income exceeding Rs150 million annually will be subject to a super tax. This is designed to target higher-income agricultural operations and ensure fairer tax distribution across different income levels in the agriculture sector.

The bill also establishes tax rates based on the size of agricultural land. Farms with 50 acres or more of cultivated land, or 100 acres or more of uncultivated land, will be taxed under the new framework. The land is divided into three taxation zones:

  • Zone One: Land between 12.5 acres and 25 acres will be taxed at Rs1,200 per acre annually.
  • Zone Two: Similar-sized land will incur a tax of Rs900 per acre.
  • Zone Three: Land in this zone will face a tax of Rs500 per acre annually.

Income Tax on Agricultural Earnings

The bill further establishes tax brackets for agricultural income. Specifically:

  • A 15% tax will be levied on annual agricultural income between Rs6 million and Rs12 million.
  • A 20% tax applies to agricultural income ranging from Rs12 million to Rs16 million.

This progressive tax structure is expected to increase the financial contribution of the agricultural sector to the provincial economy while promoting equity in taxation.

A Step Toward Economic Growth and Equity

The approval of the Agricultural Income Tax Bill 2025 marks a crucial step in KP’s efforts to modernize its agricultural sector and ensure that wealthier agricultural operations contribute their fair share to the region’s development. The bill is part of broader economic reforms designed to improve fiscal sustainability and economic growth in the province.