In Pakistan, the Rate of Tax on Agricultural income is different from others. Here you will know the Rate of Tax on Agriculture Income in Pakistan. It is considered an exempt income from tax under section 41 of the Income Tax Ordinance, 2001. Such exemption from tax under Income Tax Ordinance (ITO) 2001 ( section 41 & section 111(1)(d) ), is available only when agriculture income is charged to tax under provincial law. In simple words, it means that you will be charged tax only from the income amount that you have earned from the sale.
Whereas in the Province of Punjab the agriculture income comes under the Punjab Agriculture Income Tax Act 1997.
It is pertinent to mention here that such exemption is given by provincial revenue authority in relation to provincial tax payable on agriculture income as per Second Schedule (Income Based) in a meeting held on October 15, 2016. So, only Area / Land-based agriculture income tax is applicable since then in Punjab.
Definition of Agriculture Income under ITO 2001
(a) any rent or revenue derived by a person from land which is situated in Pakistan and is used for agricultural purposes;
(b) any income derived by a person from land situated in Pakistan from —
(i) agriculture;
(ii) the performance by a cultivator or receiver of rent-in-kind of any process ordinarily employed by such person to render the produce raised or received by the person fit to be taken to market; or
(iii) the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by such person, in respect of which no process has been performed other than a process of the nature described in sub-clause (ii); or
(c) any income derived by a person from —
(i) any building owned and occupied by the receiver of the rent or revenue of any land described in clause (a) or (b);
(ii) any building occupied by the cultivator, or the receiver of rent-in-kind, of any land in respect of which, or the produce of which, any operation specified in sub-clauses (ii) or (iii) of clause (b) is carried on, but only where the building is on, or in the immediate vicinity of the land and is a building which the receiver of the rent or revenue, or the cultivator, or the receiver of the rent-in-kind by reason of the person’s connection with the land, requires as a dwelling-house, a store-house, or other out-building.
Rate of Tax on Total Agriculture Income as per Acre
In Punjab tax is based on the grounds of cultivated land area. Tax will be applicable on the number of acres as irrigated land. If the cultivated land is unirrigated then one acre of irrigated land is equal to two-acre of unirrigated land. The other ground is, tax on unirrigated land is half of the irrigated land.
| Sr. # | Land / Area | Rate of Tax |
|---|---|---|
| 1 | 12.5 acres land ownership | No Tax |
| 2 | 12.5 acres to 25 acres | Rs. 300 per acre |
| 3 | 12.5 acres to 25 acres | Rs. 400 per acre |
| 4 | 12.5 acres to 25 acres | Rs. 500 per acre |
| Mature orchards * | ||
| 5 | Irrigated Land | Rs. 600 per acre |
| 6 | Unirrigated Land | Rs. 300 per acre |
Mature Orchard
Here “mature orchard” means is seven years of age in the case of Mango and five years of age in the case of other orchards.
Rate of Tax on Agriculture Income in Pakistan
Agriculture income is based on any rent, revenue, or any income taken from land situated in Punjab province and also that is used for agriculture purpose and you have taken the profit out of its season end sale. So the rate of tax according to the Punjab Agriculture Income Tax Act 1997 is given below:
| Sr. # | Income Slab | Percentage of Tax |
|---|---|---|
| 1 | If total income does not exceed Rs.400,000/= | 0% |
| 2 | If total income is more than Rs.400,000 but does not exceed Rs.800,000/= | Rs. 1000 |
| 3 | If total income is more than Rs.800,000 but does not exceed Rs.1,200,000/= | Rs. 2000 |
| 4 | If total income is more than Rs.1,200,000 but does not exceed Rs.2,400,000/= | 5% of the amount exceeding Rs. 24,00,000 |
| 5 | If total income is more than Rs.2,400,000 but does not exceed Rs.4,800,000/= | Rs. 60,000 plus 10% of the amount exceeding Rs. 24,00,000 |
| 6 | If total income is more than Rs.4,800,000/= | Rs 300,000 plus 15% of the amount exceeding Rs 4,800,000 |
How Tax is Collected?
The Tax on Agriculture Income is collected by the Collector of the District. In case a person is holding land in more than one District, the owner shall file a statement regarding the location of his land in Punjab.
Allowances and Deductions allowed against Agriculture Income
(a) any expenditure on account of labor for–
(i) tilling the land;
(ii) sowing the seed;
(iii) plowing/planting;
(iv) tending/pruning;
(v) rendering the produce fit to be taken to market;
(vi) any other agricultural operation;
(b) any expenditure incurred on the purchase of–
(i) seed;
(ii) fertilizers and pesticides;
(c) any expenditure incurred on
(i) hiring animals, tractors, agricultural machinery, and implements used for earning agricultural income;
(ii) repair and maintenance of watercourses;
(d) any expenditure incurred on–
(i) harvesting of agricultural produce;
(ii) marketing of the agricultural produce;
(e) any sum paid on account of–
(i) ushr;
(ii) local cess and other cesses;
(iii) water-rate (Abiana);
(iv) electricity bills in respect of tube-wells and lift pumps used for agriculture;
(v) fuel charges in respect of tube-wells and lift pumps used for agriculture;
(vi) rent of land used for agriculture;
(vii) obtaining of agricultural loans;
(viii) mark-up on agricultural loans;
(f) in respect of depreciation of such buildings, machinery and plant is the property of the assessee used for the purpose of earning agricultural income, allowance at the rate of 15 percent of the written down value; and
(g) any other expenditure not being in the nature of capital expenditure or personal expenses of the assessee laid out or expended wholly and exclusively for the purposes of agriculture.
Conclusion
In the end, I must say that agriculture income in Pakistan is totally exempted from tax. You will pay tax only on that income that you earned as profit after the season-end sale.
Download Punjab Agriculture Income Tax Act 1997 in Pdf.
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