The Punjab government has proposed significant changes to agricultural taxation and water charges under the Punjab Finance Bill 2026, introducing higher tax rates on agricultural land and orchards while revising the province’s water cess system.
According to the proposed amendments to the Agriculture Income Tax Rules, agricultural land holdings of up to 12.5 acres will remain exempt from taxation. However, larger landowners could face substantially higher tax liabilities under the new framework.
The government has proposed increasing the tax rate for landholdings exceeding 12.5 acres and up to 25 acres from the current Rs. 300 per acre to Rs. 1,000 per acre. Similarly, landowners with holdings above 25 acres and up to 50 acres would also be charged Rs. 1,000 per acre, compared to the existing rate of Rs. 400 per acre.
For agricultural land exceeding 50 acres, the tax rate has been proposed at Rs. 1,000 per acre, doubling the current rate of Rs. 500 per acre.
The Finance Bill also proposes higher taxes on orchards. The levy on matured orchards would increase from Rs. 600 to Rs. 1,000 per acre, while the tax on unirrigated orchards would rise from Rs. 300 to Rs. 500 per acre.
In addition to tax changes, the Punjab government plans to replace the existing crop-based water cess mechanism with a flat-rate system. Under the proposed structure, farmers would pay Rs. 1,650 per acre during the Kharif season and Rs. 850 per acre during the Rabi season, regardless of the crop cultivated.
Despite the proposed increases, the government has also announced relief measures for the agriculture sector. One key proposal is the abolition of the cotton fee imposed on the arrival of raw cotton at ginning factories.
Officials stated that cotton production has witnessed a significant decline in recent years, resulting in the closure of numerous ginning units, particularly in South Punjab. The removal of the fee is intended to support the cotton industry, encourage production, and help revive agricultural activity in affected regions.
The proposed measures are part of the Punjab government’s broader revenue and administrative reform agenda for the upcoming fiscal year. The final implementation of these proposals will depend on approval by the provincial assembly during the budget process.
