In a key development ahead of the IMF Executive Board meeting, the Punjab and Sindh governments have restored the old tax rates on agricultural income, officials confirmed on Thursday.
The decision comes as part of a temporary relief package extended to farmers who suffered heavy losses due to devastating floods in recent years. The restored rates will remain effective from January 1 to June 30, 2025, after which new, higher rates will be re-imposed from July 2025 in line with IMF requirements.
According to officials, both provincial governments had temporarily reduced agricultural income taxes to ease the financial burden on the farming community. “Farmers were given relief due to flood losses,” an official said, adding that the tax relief is for only six months and was designed in consultation with the IMF.
Pakistan’s IMF review, next tranche
This adjustment in tax policy comes at a crucial time when Pakistan is awaiting the IMF Executive Board’s approval of the next loan tranche. A staff-level agreement between Pakistan and the IMF was reached on October 15, and the board meeting is expected within the next four weeks.
Once approved, Pakistan will receive the next $1.2 billion tranche, a critical inflow to stabilize the economy and maintain fiscal discipline under the IMF program.
Details of restored (old) tax structure
Under the restored agricultural tax regime, the following rates will apply between January and June 2025:
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No tax on agricultural income up to Rs1.2 million.
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5% tax on income between Rs1.2 million and Rs2.4 million.
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For income between Rs2.4 million and Rs4.8 million, a flat Rs60,000 plus 10% tax on the additional income.
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For income above Rs4.8 million, a base of Rs300,000 plus 15% tax on the excess amount.
Officials clarified that this structure mirrors the previous tax schedule before the flood-related changes were introduced.
New IMF-aligned tax rates to take effect from July 2025
From July 1, 2025, the new higher tax rates -- agreed under IMF conditions -- will come into force. These include:
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No tax on income up to Rs600,000.
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5% tax on income between Rs600,000 and Rs1.2 million.
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Rs60,000 plus 10% tax on additional income between Rs1.2 million and Rs2.4 million.
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Rs180,000 plus 15% tax on income exceeding Rs2.4 million.
These revised rates are aimed at broadening the tax base and enhancing revenue collection in line with IMF fiscal benchmarks.
