Navigating the tax system for agriculture in Pakistan can be complex. It’s crucial to understand that taxes on agricultural income are a provincial matter. In Khyber Pakhtunkhwa (KPK), the provincial government levies two primary taxes on the agricultural sector: Agricultural Income Tax and Land Tax.
It’s important to note that while KPK taxes agricultural income, the federal government exempts agricultural income from federal income tax. This article will break down both of these KPK-specific taxes.
Agricultural Income Tax in KPK
This tax is levied on the net income generated from cultivating agricultural land. The Khyber Pakhtunkhwa Land Tax and Agricultural Income Tax Ordinance, 2000, along with its amendment, The Khyber Pakhtunkhwa Agricultural Income Tax Act, 2025, defines the tax rates which are structured in progressive income brackets, meaning higher income attracts a higher tax rate.
Agricultural Income Tax Rates for Small Farmers
| Sr. No. | Taxable Income | Rate of Agricultural Income Tax |
| 1 | Up to Rs. 600,000 | 0% |
| 2 | Rs. 600,001 – Rs. 1,200,000 | 15% of the amount exceeding Rs. 600,000 |
| 3 | Rs. 1,200,001 – Rs. 1,600,000 | Rs. 90,000 + 20% of the amount exceeding Rs. 1,200,000 |
| 4 | Rs. 1,600,001 – Rs. 3,200,000 | Rs. 170,000 + 30% of the amount exceeding Rs. 1,600,000 |
| 5 | Rs. 3,200,001 – Rs. 5,600,000 | Rs. 650,000 + 40% of the amount exceeding Rs. 3,200,000 |
| 6 | Rs. 5,600,001 – Rs. 150,000,000 | Rs. 1,610,000 + 45% of the amount exceeding Rs. 5,600,000 |
Agricultural Income Tax Rates for Corporate Farming
| Type of Company | Rate of Tax |
| Small company | 20% |
| Company | 29% |
Super Tax on Agricultural Income
For individuals and companies with very high agricultural income, a super tax is also applicable in addition to the agricultural income tax.
| Sr. No. | Agricultural Income Bracket | Super Tax Rate |
| 1 | Up to Rs. 150 million | 0% |
| 2 | Rs. 150 million – Rs. 200 million | 1% |
| 3 | Rs. 200 million – Rs. 250 million | 2% |
| 4 | Rs. 250 million – Rs. 300 million | 3% |
| 5 | Rs. 300 million – Rs. 350 million | 4% |
| 6 | Rs. 350 million – Rs. 400 million | 6% |
| 7 | Rs. 400 million – Rs. 500 million | 8% |
| 8 | Above Rs. 500 million | 10% |
Land Tax in KPK
Land Tax is a separate tax based on the ownership of agricultural land, not directly on the income generated from it. The rates are determined by the type of land (irrigated/un-irrigated, orchards) and the zone in which the land is located. KPK is divided into four zones for land tax purposes, with varying rates per acre.
Land Tax Rates by Zone and Land Type (Per Acre)
Zone I:
| Slab of Total Cultivated Land (excluding orchards – Irrigated equivalent*) | Rate of Tax per Acre |
| (i) Not exceeding 12½ acres | Nil |
| (ii) Exceeding 12½ acres but not exceeding 25 acres | Rs. 1,200/- |
| (iii) Exceeding 25 acres but not exceeding 50 acres | Rs. 2,500/- |
| (iv) Exceeding 50 acres | Rs. 3,500/- |
| Mature Orchards: | |
| (i) Irrigated | Rs. 3,500/- |
| (ii) Un-irrigated | Rs. 1,750/- |
Zone II:
| Slab of Total Cultivated Land (excluding orchards – Irrigated equivalent*) | Rate of Tax per Acre |
| (i) Not exceeding 12½ acres | Nil |
| (ii) Exceeding 12½ acres but not exceeding 25 acres | Rs. 900/- |
| (iii) Exceeding 25 acres but not exceeding 50 acres | Rs. 1,700/- |
| (iv) Exceeding 50 acres | Rs. 2,500/- |
| Mature Orchards: | |
| (i) Irrigated | Rs. 2,500/- |
| (ii) Un-irrigated | Rs. 1,250/- |
Zone III:
| Slab of Total Cultivated Land (excluding orchards – Irrigated equivalent*) | Rate of Tax per Acre |
| (i) Not exceeding 12½ acres | Nil |
| (ii) Exceeding 12½ acres but not exceeding 25 acres | Rs. 500/- |
| (iii) Exceeding 25 acres but not exceeding 50 acres | Rs. 1,000/- |
| (iv) Exceeding 50 acres | Rs. 1,500/- |
| Mature Orchards: | |
| (i) Irrigated | Rs. 1,500/- |
| (ii) Un-irrigated | Rs. 750/- |
Zone IV:
| Slab of Total Cultivated Land (excluding orchards – Irrigated equivalent*) | Rate of Tax per Acre |
| (i) Not exceeding 12½ acres | Nil |
| (ii) Exceeding 12½ acres but not exceeding 25 acres | Rs. 300/- |
| (iii) Exceeding 25 acres but not exceeding 50 acres | Rs. 600/- |
| (iv) Exceeding 50 acres | Rs. 900/- |
| Mature Orchards: | |
| (i) Irrigated | Rs. 900/- |
| (ii) Un-irrigated | Rs. 450/- |
Understanding Your Tax Obligations
For landowners in KPK, it’s vital to understand both Agricultural Income Tax and Land Tax to ensure compliance. To determine your specific tax liabilities:
- Identify Land Zone: Determine the zone in which your agricultural land is located to apply the correct Land Tax rates. Contact the KPK Revenue Department for zone information if needed.
- Calculate Land Tax: Based on your land type, area, and zone, calculate your Land Tax liability using the provided rates.
- Calculate Agricultural Income Tax (if applicable): If your net agricultural income exceeds the exempt limit, calculate your Agricultural Income Tax based on the progressive income brackets. Consider if you qualify under the “small farmer” or “corporate farming” categories as rates differ.
- File Tax Returns: Ensure you file the necessary tax returns for Agricultural Income Tax with the KPK government if your income exceeds the taxable limit. Consult with the KPK Revenue Department or a tax advisor for filing procedures and deadlines.
Beyond KPK
If you earn income through agriculture in other parts of Pakkistan, it’s essential to understand the tax laws of the province where your agricultural land is situated. Here’s a province-wise breakdown of agricultural income tax rules in Pakistan:
- In Punjab, agricultural income up to Rs. 400,000 per year is exempt from tax. If your income exceeds this threshold, the agricultural income tax is charged according to the official Punjab agricultural income tax rates. Make sure to consult the latest rates issued by the Punjab Board of Revenue.
- In Sindh, agricultural income up to Rs. 600,000 annually is tax-free. However, if your income exceeds Rs. 600,000, it becomes taxable under the Sindh agricultural tax rules. The Sindh Revenue Board provides detailed tax slabs and rates for agricultural landowners and tenants.
Key Points to Remember
You should keep the following points in mind about KPK Agricultural Income Tax and Land Tax:
- Progressive Tax: The tax rates are progressive, increasing with higher income brackets.
- Filing Responsibility: Landowners whose agricultural income exceeds the exempt limit are responsible for filing income tax returns with the KPK government.
- Net Income: The tax is levied on net agricultural income, meaning allowable deductions for expenses can be claimed.
- Land Ownership Based: Land tax is levied on land ownership, not directly on income.
- Zonal Variation: Tax rates vary significantly depending on the designated zone of the land. Zone details should be obtained from the KPK Revenue Department.
- Land Type Differentiation: Rates differ for cultivated land (based on slabs and irrigation) and orchards.
- Irrigated Equivalent: For cultivated land (excluding orchards), the tax calculation uses an “irrigated land equivalent” – treating one acre of irrigated land as equal to two acres of un-irrigated land.
