The Punjab government on Tuesday proposed a broad set of revenue measures under the Punjab Finance Bill 2026, including higher Abiana, token tax and agriculture income tax, as it seeks to widen the provincial tax base and create additional fiscal space without introducing entirely new taxes.
The provincial government has set a tax collection target of Rs 748.70 billion for the next fiscal year, which is 42.69 per cent higher than last year’s target of Rs 524.70bn.
Among the key proposals is the replacement of the existing crop-based Abiana system with a flat-rate regime. Under the new structure, water charges during the Kharif season will be fixed at Rs 1,650 per acre, while charges for the Rabi season will be set at Rs 850 per acre.
The bill also proposes an additional irrigation charge of Rs 2,000 per acre annually for approved orchards, while water supplied through government or private lift irrigation schemes will be charged at Rs 2,250 per acre per year.
In the agriculture sector, the government has proposed a uniform agriculture income tax of Rs 1,000 per acre for landowners holding more than 12.5 acres. At present, landowners pay Rs 300 per acre on holdings between 12.5 and 25 acres, Rs 400 per acre on holdings between 25 and 50 acres and Rs 500 per acre on holdings exceeding 50 acres.
Tax rates on orchards have also been raised. The levy on irrigated orchards has been increased from Rs 600 to Rs 1,000 per acre, while that on non-irrigated orchards has been raised from Rs 300 to Rs 500 per acre.
As a relief measure for the cotton sector, however, the bill abolishes the cotton fee imposed under the Punjab Finance Act, 1973. The seasonal charge on raw cotton arriving at ginning factories has been withdrawn in view of falling production and the closure of a large number of ginning units in recent years.
The proposed legislation also seeks a threefold increase in token tax on commercial loader vehicles. Vehicles with a maximum laden capacity exceeding 4,060kg but not exceeding 8,120kg will pay Rs 6,600, up from Rs 2,200. Vehicles with a capacity exceeding 8,120kg but not exceeding 12,000kg will pay Rs 12,000 instead of Rs 4,000. Long trailers and other vehicles with a capacity exceeding 12,000kg but not exceeding 16,000kg will be charged Rs 18,000, compared to the current Rs 6,000, while vehicles exceeding 16,000kg will pay Rs 24,000, up from Rs 8,000.
Token tax on private vehicles with larger engine capacities has also been raised. For vehicles with engine power exceeding 1,000cc but not exceeding 2,000cc, the rate has been proposed at 0.3pc of invoice value, against the existing 0.2pc. Vehicles above 2,000cc will be taxed at 0.4pc, compared with the current 0.3pc.
The bill further makes electronic payment of property tax mandatory under the Punjab Urban Immovable Property Tax Act, 1958, ending the system under which both manual and digital payments were allowed. At the same time, the government has eased the late-payment regime by replacing monthly surcharges with a quarterly system, under which penalties will accrue after Sept 30, Dec 31, March 31 and June 30 each year.
A major change has also been proposed in the taxation of restaurants through a dual sales tax structure linked to the mode of payment. Under the bill, payments made through debit cards, credit cards, mobile wallets or QR codes will attract an 8pc sales tax, while all other payment methods will be taxed at 16pc.
The bill also amends the Punjab Sales Tax on Services Act, 2012, to tighten compliance and restructure input tax adjustment rules. The definition of an active taxpayer has been narrowed to exclude persons whose registration has been suspended or blacklisted by the Punjab Revenue Authority (PRA), as well as those who fail to file returns for two consecutive tax periods.
Input tax on capital goods, machinery and fixed assets will now be adjusted against output tax in 12 equal monthly instalments instead of being claimed upfront. Moreover, input tax claims based on invoices issued by persons not appearing on the active taxpayers’ lists of either the PRA or the Federal Board of Revenue will no longer be admissible.
A new Section 16CCC empowers the PRA to establish a risk register for profiling taxpayers, suppliers and transactions. If an input tax claim is considered risky, the authority may defer or disallow the claim, seek additional documentation or refer the matter for audit. However, no adverse action can be taken without first giving the taxpayer an opportunity to be heard. An appeal mechanism has also been introduced, requiring the relevant commissioner to decide appeals within 30 days.
Penalties under the sales tax law have been increased sharply. Individuals may face fines of up to Rs 100,000 for a first violation and the same amount for each subsequent default. Companies and associations of persons may be fined up to Rs 500,000 for both initial and repeated violations.
The reduced sales tax rate applicable to a wide range of services, including IT-related, transport and professional services, has been increased from 5pc to 8pc. Two new service categories have also been added to the reduced-rate schedule. Foreign exchange services will be taxed at 3pc without input tax adjustment, while event management services will attract an 8pc rate without input tax adjustment.
The bill also proposes amendments to the Punjab Motor Vehicle Transaction Licensees Act, 2015, under which all motor vehicle dealers will be designated as withholding agents responsible for collecting and depositing taxes, duties and fees at the point of sale.
Under the new provisions, dealers will not be allowed to hand over a vehicle to a buyer unless it has been registered, all applicable dues have been paid and government-approved number plates have been affixed. Dealers violating these requirements will be liable to pay the outstanding amount along with an equivalent penalty.
According to the government, the measure is aimed at curbing the use of unregistered vehicles, streamlining the registration process and improving law and order across Punjab.
