ISLAMABAD: The government is planning vigorously implementing the Agriculture Income Tax (AIT) Law from the new fiscal year (2014-15), making it mandatory for all taxpayers to declare agricultural income in income tax returns to provide evidence of income tax paid on agricultural income.
As per details, the Punjab Agricultural Income Tax Act 1997, which was land based, was amended in 2001 to income based. The amendment stipulated that the tax will be land or income based, depending on whichever is higher. The rates provided in the First Schedule to the Act stipulated that if ownership is up to 12.5 acres there will be no tax, where it is more than 12.5 acres but less than 25 acres, tax will be levied at the rate of Rs150 per acre and land beyond 25 acres will be taxed at the rate of Rs250 per acre.
In budget 2013-14, Finance Minister Ishaq Dar had announced that the tax credit to agricultural income would be given only if provincial income tax on such income is paid to increase revenue collection of provinces from agricultural income. However, the decision will be enforced from Tax Year 2014 and resultant addition in income shall be made under section 111 of the Income Tax Ordinance, 2001 (Ordinance) if the income declared in the federal tax return is higher than the income disclosed in the AIT returns to provincial authorities. Tax Year 2014 means that the income tax returns to be filed in the month of September 2014 would cover the said amendment.
Through Finance Act, 2013, a proviso was added to sub-section (1) of Section 111 of the Income Tax Ordinance, 2001 providing that where a taxpayer explains the nature and source of the amount credited or the investment made, money or valuable article owned or funds from which the expenditure was made, by way of agricultural income, such explanation shall be accepted only to the extent of agricultural income worked back on the basis of agricultural income tax paid subject to furnishing of proof of payment of agriculture tax under the relevant provincial law.
Meanwhile, in Punjab about Rs1 billion was collected annually on account of AIT, but in other provinces there is no collection. The imposition of agriculture tax is part of the PML-N’s manifesto and the party has proposed that 50 percent of revenue generated through AIT must be spent in the district from where it is collected.
Only collection of the GST from the farm inputs is providing the government about Rs100 billion. Further, farmers with above 12.5 acres of land holdings are also paying income tax at a flat rate of Rs50 per acre in Rabi crop season, Rs80 per acre on Kharif crops and Rs150 per acre on orchids. Re1 is imposed as Cess on per 40kg of sugarcane (keeping in view Pakistan’s annual cane production of 60 million tonnes the government is collecting about Rs1.6 billion in shape of cane Cess), cotton seed and cotton seed oil taxes are also imposed on the farmers. Farmers are also paying tehsil, district and provincial taxes which include Mandi tax, abyana, malya road tax and a 10 per cent commission to Arhatis.
