The Punjab government has prepared the Finance Bill for the fiscal year 2026-27, introducing wide-ranging reforms aimed at increasing provincial revenue, expanding the tax base and restructuring compliance across multiple sectors, officials said.
The proposed legislation touches key areas including vehicle taxation, property transactions, digital payments, services, agriculture and business regulation, signaling one of the most comprehensive fiscal adjustments in recent years.
Vehicle token tax set for major revision after two decades
One of the most significant proposals in the bill is a long-awaited revision of vehicle token tax rates, which have remained largely unchanged for nearly 20 years.
Under the proposed changes, higher token taxes would apply to vehicles above 1,000cc, while commercial vehicles such as trucks and freight transport units are also expected to face increased levies.
The government says the adjustment is aimed at aligning outdated tax structures with current market values and improving revenue collection from the transport sector.
Major incentive for electric vehicles
In contrast to higher taxes on conventional vehicles, the bill introduces a strong incentive for clean mobility.
A 99% reduction in token tax for electric vehicles has been proposed to encourage adoption of EVs across the province. Officials say the measure is designed to reduce emissions and support the transition toward sustainable transport.
Property transfer and registration reforms
The Finance Bill also proposes an increase in motor vehicle transfer fees, along with alignment of hire purchase agreement charges with standard transfer costs.
In a major administrative shift, vehicle dealers may also be registered as official registration agents, allowing ownership transfer processes to be completed at the point of sale.
Authorities are also planning stricter enforcement measures against unregistered vehicles to improve compliance.
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Higher taxes on services and digital payments
Significant changes are also proposed in the services sector. The bill suggests raising sales tax on hotel payments made through credit cards, debit cards and online systems to 8%.
Overall sales tax on selected services is proposed to increase from 5% to 8%, alongside a new 3% tax on foreign exchange companies and money changers.
The reforms are part of a broader effort to modernise the provincial tax system and improve documentation of financial transactions.
Property tax reforms and e-payment mandate
The bill proposes making property tax payments mandatory through the e-pay system, moving toward a fully digital collection model.
It also suggests shifting surcharge calculations on late payments from a monthly to a quarterly basis.
Under the revised framework, taxpayers opting for self-assessment may receive a 5% concession, as the government attempts to improve compliance and transparency in property valuation.
Support for new businesses
To encourage entrepreneurship, the government has proposed exempting new businesses from certain tax obligations for the first six months of operation.
However, the bill also recommends restricting government contracts, licences and NOCs for unregistered traders, alongside increased penalties for tax violations.
Relief for cotton farmers, higher agricultural taxes overall
In agriculture, the bill proposes abolishing the cotton fee on raw cotton, a move aimed at reducing costs for growers, particularly in South Punjab.
At the same time, agricultural income tax rates are set for revision based on landholding size.
- Land up to 12.5 acres: exempt
- 12.5–25 acres: increased to Rs1,000 per acre
- 25–50 acres: increased to Rs1,000 per acre
- Above 50 acres: increased to Rs1,000 per acre
Taxes on orchards are also proposed to rise, with irrigated orchards taxed at Rs1,000 per acre and non-irrigated orchards at Rs500 per acre.
Increased irrigation charges (abiyana)
The bill proposes higher abiyana (irrigation charges) across crop cycles:
- Kharif crops: Rs1,650 per acre
- Rabi crops: Rs850 per acre
- Orchards: Rs2,000 per acre annually
- Government lift irrigation: Rs2,250 per acre annually
Officials say the adjustments are intended to improve cost recovery in the irrigation system.
Political reaction and inter-provincial comparison
Reacting to the proposals, Muzammil Aslam, Adviser to Finance in Khyber Pakhtunkhwa, said Punjab’s proposed tax rates are higher compared to his province.
He claimed KP maintains lower tax rates on digital payments and vehicle-related charges, highlighting inter-provincial differences in fiscal policy approaches.
