Punjab Finance Bill 2026-27 — The Punjab government has proposed raising its provincial Punjab tax revenue by 42.69 percent in the next financial year, targeting Rs748.70 billion in collections against last year’s Rs524.70 billion, through a sweeping set of reforms to water charges, agriculture income tax, vehicle token tax, property tax and the sales tax on services — all framed as base-broadening measures rather than new levies on existing taxpayers.
The proposals are contained in the Punjab Finance Bill 2026, tabled alongside the provincial budget, which seeks to widen the provincial tax base and create additional fiscal space without, the government maintains, imposing fresh burdens on the public.
Punjab Finance Bill 2026-27 Abiana Overhauled: Flat-Rate Water Charges Replace Crop System
The bill proposes replacing 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 Rs1,650 per acre and Rs850 per acre during the Rabi season. An additional irrigation charge of Rs2,000 per acre annually has been proposed for approved orchards, while water supplied through government or private lift irrigation schemes will be charged at Rs2,250 per acre per year.
Agriculture Income Tax Standardised at Rs1,000 Per Acre
The bill proposes a uniform agriculture income tax of Rs1,000 per acre for landowners holding more than 12.5 acres. At present, the tax is levied at Rs300 per acre on holdings between 12.5 and 25 acres, Rs400 per acre on holdings between 25 and 50 acres and Rs500 per acre on holdings exceeding 50 acres. Tax rates on orchards have also been increased, with the levy on irrigated orchards rising from Rs600 to Rs1,000 per acre and that on non-irrigated orchards from Rs300 to Rs500 per acre.
In a relief measure for the cotton sector, the bill abolishes the cotton fee levied under the Punjab Finance Act 1973, with the seasonal charge on raw cotton arriving at ginning factories removed in view of declining production and the closure of a large number of ginning units in recent years.
Punjab Tax Revenue 2026-27: Token Tax Tripled on Commercial Loaders
A threefold increase in token tax on commercial loader vehicles is also proposed. Vehicles with a maximum laden capacity exceeding 4,060kg but not exceeding 8,120kg will pay Rs6,600, up from Rs2,200. Vehicles between 8,120kg and 12,000kg will see the levy rise from Rs4,000 to Rs12,000. Long trailers and vehicles between 12,000kg and 16,000kg will pay Rs18,000 against the current Rs6,000, while those exceeding 16,000kg will face a token tax of Rs24,000, up from Rs8,000.
Token tax on private vehicles with larger engine capacities has also been increased. The rate for vehicles with engine power exceeding 1,000cc but not exceeding 2,000cc has been set at 0.3 percent of invoice value, up from the existing 0.2 percent, while vehicles above 2,000cc will be taxed at 0.4 percent against the current 0.3 percent.
Property Tax Goes Fully Digital; Restaurant Levy Split by Payment Mode
The bill makes electronic payment of property tax mandatory under the Punjab Urban Immovable Property Tax Act 1958, ending the existing system that permitted both manual and digital payments. At the same time, the government has eased the late-payment regime by replacing monthly surcharges with a quarterly system, with penalties accruing after September 30, December 31, March 31 and June 30 each year.
The bill introduces a dual tax structure for restaurants: an 8 percent sales tax rate where payment is made through debit or credit cards, mobile wallets or QR codes, against a 16 percent rate on all other payment methods. The reduced rate applicable to a broad range of services including IT-related, transport and professional services has been increased from 5 percent to 8 percent. Two new service categories have also been added: foreign exchange services will be taxed at 3 percent without input tax adjustment, and event management services at 8 percent without input tax adjustment.
Sales Tax Compliance Tightened; Car Dealers Made Withholding Agents
The Punjab Sales Tax on Services Act 2012 has been amended to tighten compliance, narrowing the definition of an active taxpayer to exclude those whose registration has been suspended or who fail to file returns for two consecutive periods. Input tax on capital goods and machinery will now be adjusted against output tax in 12 equal monthly instalments rather than claimed upfront. A new provision authorises the Punjab Revenue Authority to establish a risk register for profiling taxpayers, suppliers and transactions, with an appeal mechanism requiring decisions within 30 days. Penalties for violations have been raised substantially, with individuals facing fines of up to Rs100,000 and companies up to Rs500,000.
The bill further designates all motor vehicle dealers as withholding agents responsible for collecting and depositing taxes, duties and fees at the point of sale. Dealers will not be permitted 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, with violations attracting an equivalent penalty on outstanding amounts.
Published in SouthAsianDesk, June 18, 2026
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