The federal government is set to impose a capital gains tax on cryptocurrency transactions as part of Budget 2026-27, in a major move to bring Pakistan’s fast-growing digital asset market into the tax net.
Sources said the government, after consultations with the International Monetary Fund, has finalized a plan to expand the scope of Section 37 of the Income Tax Ordinance, 2001, so that gains earned from cryptocurrency trading can be taxed. The proposed tax rate is expected to range between 20 percent and 30 percent, though a final decision is yet to be announced.
Officials said a high-level government committee has prepared recommendations covering both the taxation and documentation of cryptocurrency transactions. The proposals also include measures to identify and regulate unregistered participants in the market.
The move is aimed at building a broader framework for taxing digital assets while ensuring that investment is not excessively diverted away from traditional sectors of the economy into cryptocurrencies.
Officials and tax experts consider the taxation of capital gains from virtual currency trading to be one of the more straightforward parts of the proposed regime, as such transactions are broadly similar to securities trading.
The initiative comes amid growing calls for regulation of Pakistan’s rapidly expanding crypto market.
According to a report submitted by the Federal Tax Ombudsman to the Federal Board of Revenue, there are around 560 million cryptocurrency users worldwide, including an estimated nine million users in Pakistan. The report noted that Pakistan ranks among the world’s leading countries in cryptocurrency adoption.
While the State Bank of Pakistan issued a circular in April 2018 warning financial institutions about the risks linked to virtual currencies, it did not explicitly declare cryptocurrencies illegal.
The Federal Tax Ombudsman observed that significant cryptocurrency-related commercial activity is taking place outside the country’s tax framework, resulting in large undocumented and untaxed transactions.
The report also criticized the absence of a regulatory and taxation system for digital assets despite the sector’s rapid expansion, saying income, profits, and assets generated through crypto dealings should be brought within a documented and taxable framework.
The Ministry of Finance has confirmed that the matter remains under consideration and is being examined in consultation with industry experts and other stakeholders.
Experts say that while regulation and legalization of digital assets are increasingly necessary, designing an effective tax framework will be challenging. Policymakers will need to strike a balance between generating tax revenue and avoiding measures that could discourage innovation or trigger capital flight.
They also point to added complications in taxing activities such as crypto mining, staking rewards, yield farming, decentralized finance, non-fungible tokens, and token offerings, many of which involve non-fiat assets and transactions that do not pass through conventional banking channels.
Tax experts have suggested that amendments to the Income Tax Ordinance should formally classify crypto assets as specified financial instruments and lay down clear rules for calculating taxable gains and losses, similar to those applied to listed securities.
Under proposals being discussed, gains on cryptocurrency disposals may be taxed on a realized basis using the First-In, First-Out valuation method. Tax rates may also vary according to the holding period of assets in a bid to encourage long-term investment and discourage speculative trading.
One of the most sensitive issues under review is the treatment of undeclared offshore crypto holdings. Many Pakistani investors are believed to have opened accounts on foreign platforms or used overseas addresses because of the absence of a clear domestic legal framework in previous years.
Experts warn that imposing taxes without offering a transitional compliance mechanism could encourage asset concealment, capital flight, or even the permanent loss of potential tax revenue. They say the government will need to ensure compliance while also offering a practical path for the regularization of previously undeclared assets.
