The implementation of the International Monetary Fund’s (IMF) condition to impose income tax on agricultural income has been delayed and will now begin in July 2025, instead of January, as initially planned. This decision comes under the framework of the National Fiscal Pact, with the federal government requesting additional time from the IMF to meet the requirements.

Under the National Fiscal Pact, provinces are responsible for enacting legislation to impose taxes on agricultural income. However, none of the provinces have completed the required legislative process, despite assurances given to the IMF that the taxes would be implemented by January 2025. According to IMF conditions, the deadline for completing the legislation was October 30, but provinces failed to meet this requirement.

The proposed taxation framework requires small farmers to be taxed at the federal income tax rate, while commercial farmers are to be taxed at the federal corporate income tax rate. However, the lack of progress on provincial legislation has delayed the implementation of this condition.

Sources within the Ministry of Finance revealed that provinces have not yet been officially informed about the new timeline to impose taxes on agricultural income starting in July 2025. This delay could complicate upcoming negotiations with the IMF, as the failure to meet the agreed-upon timeline may raise concerns about Pakistan’s commitment to fulfilling its obligations under the IMF program.

The delay in implementing agricultural income tax is likely to create challenges for the federal government in its discussions with the IMF. The taxation of agricultural income is a key condition of the IMF program, aimed at broadening the tax base and addressing revenue shortfalls. The inability to meet the January deadline may lead to increased scrutiny during future negotiations.