The federal government is likely to introduce taxation on cryptocurrency transactions in the upcoming Budget 2026-27, marking a significant step toward regulating Pakistan’s rapidly growing digital asset market.
According to sources, the government has finalized a proposal, following consultations with the International Monetary Fund (IMF), to bring cryptocurrency gains under the ambit of capital gains tax (CGT). The plan involves expanding Section 37 of the Income Tax Ordinance, 2001, to cover profits earned from the sale and trading of digital assets.
Officials are considering a CGT rate ranging between 20 percent and 30 percent on crypto-related gains, although the final rate is expected to be announced during the federal budget presentation.
A high-level committee has reportedly prepared recommendations covering both taxation and documentation requirements for cryptocurrency transactions. The proposals also include measures to identify unregistered investors and strengthen oversight of digital asset activities.
The government aims to establish a comprehensive taxation framework for cryptocurrencies while ensuring that excessive capital does not shift away from traditional investment sectors into digital assets.
Capital gains taxation is considered the most straightforward component of the proposed framework because cryptocurrency trading shares similarities with stock and securities transactions. However, authorities are also examining more complex areas such as crypto mining, staking rewards, yield farming, decentralized finance (DeFi) activities, non-fungible tokens (NFTs), Initial Coin Offerings (ICOs), and Initial Exchange Offerings (IEOs).
The move comes as Pakistan continues to witness rapid growth in cryptocurrency adoption. A report submitted by the Federal Tax Ombudsman (FTO) to the Federal Board of Revenue (FBR) estimated that around nine million Pakistanis are involved in cryptocurrency activities, placing the country among the leading markets for digital asset adoption globally.
The FTO has highlighted that a substantial volume of cryptocurrency transactions currently takes place outside the documented economy, resulting in significant untaxed and undocumented income. The report stressed the need for a regulatory and taxation framework to bring digital asset-related profits into the formal tax system and broaden the country’s tax base.
Tax experts have recommended formally recognizing crypto assets as specified financial instruments under the Income Tax Ordinance, 2001. They have also proposed clear rules for calculating gains and losses, similar to those applied to listed securities.
Under the proposals being discussed, cryptocurrency gains could be taxed on a realized basis using the First-In, First-Out (FIFO) valuation method. Authorities are also considering varying tax rates based on asset holding periods to encourage long-term investment and discourage speculative trading.
One of the key challenges facing policymakers is the treatment of undeclared offshore cryptocurrency holdings. Many Pakistani investors reportedly opened accounts on foreign crypto exchanges due to the absence of a local legal and regulatory framework in previous years.
Experts caution that imposing taxes without introducing a transitional compliance or regularization mechanism could lead to capital flight, asset concealment, and reduced tax collection. As a result, the government is expected to explore practical measures that encourage voluntary compliance while bringing previously undeclared digital assets into the tax net.
Tax Impact of the Proposed Crypto Tax
If approved, the new regime would have significant implications for cryptocurrency investors and traders in Pakistan:
- Capital gains from cryptocurrency sales may become taxable at rates between 20% and 30%.
- Investors could be required to maintain detailed transaction records for tax reporting purposes.
- Previously undeclared crypto holdings may face disclosure requirements under future compliance schemes.
- Crypto exchanges and digital asset platforms may be subject to enhanced reporting and documentation obligations.
- The FBR could gain access to broader transaction data, improving enforcement and reducing tax evasion.
- The measure is expected to generate additional tax revenue while expanding Pakistan’s documented economy.
The proposed changes reflect the government’s broader efforts to regulate digital assets, increase tax compliance, and align Pakistan’s financial framework with evolving global cryptocurrency regulations.
