Tax Treatment Of Cryptocurrencies & Digital Assets In Pakistan

Are crypto gains taxable in Pakistan despite the SBP ban? A comprehensive guide to the FBR's tax treatment of Bitcoin, USDT, and digital assets under Section 39.

By Syed Asad Hussain Zaidi · 10 September 2026

The Cryptocurrency Paradox in Pakistan The legal status of cryptocurrencies (Bitcoin, Ethereum, USDT) in Pakistan is heavily paradoxical. On one hand, the State Bank of Pakistan (SBP) has explicitly prohibited commercial banks and financial institutions from processing, trading, or facilitating cryptocurrency transactions (via Circular No. 3 of 2018). On the other hand, hundreds of thousands of Pakistanis actively trade crypto on peer-to-peer (P2P) platforms like Binance. When these traders encash their profits into local bank accounts via P2P transfers, they face a critical question: Does the Federal Board of Revenue (FBR) tax illegal or unrecognized assets? This guide explains the FBR's legal stance on taxing crypto gains in Tax Year 2026-27. --- The FBR's Core Principle: "Income is Income" Under Pakistani tax jurisprudence, the legality of the underlying business does not exempt the income from taxation. The Income Tax Ordinance 2001 is concerned with the accrual and receipt of economic wealth, not whether the State Bank endorses the asset. If you generate a profit and that profit enters your economic control (e.g., deposited into your Pakistani bank account or held as a foreign asset), it is subject to income tax. The FBR will not arrest you for trading crypto, but they will penalize you for concealing the wealth generated from it. --- How Crypto Gains are Categorized (Section 39) Because cryptocurrency is not recognized as a legal currency, a security, or a traditional commodity by the SECP or SBP, the FBR generally assesses cryptocurrency trading profits under Section 39: Income from Other Sources. The Taxation Mechanism Trading Profits: If you buy Bitcoin for $10,000 and sell it for $15,000, the $5,000 gain (when converted to PKR) must be declared under "Income from Other Sources" in your Iris tax return. This income is added to your total taxable income for the year and taxed at your applicable normal slab rate (which can go up to 35%). Capital Gains? Because crypto is not officially defined as a "Capital Asset" under Section 37 (like shares of a public company or real estate), you generally cannot avail the lower, fixed Capital Gains Tax (CGT) rates. It is treated as ordinary income. Mining Income: If you run a crypto mining operation, the value of the mined coins is treated as business income. However, claiming deductions for electricity and hardware depreciation is highly complex due to the unregulated nature of the sector. --- Foreign Assets and the Wealth Statement (Section 116) The most dangerous aspect of crypto for Pakistani taxpayers is not the income tax, but the Wealth Statement. Under Section 116 of the Income Tax Ordinance, resident taxpayers must declare all their assets and liabilities, both inside and outside Pakistan. Declaring Binance Holdings If you hold USDT or Bitcoin in a Binance wallet or a hardware ledger on June 30th (the end of the tax year), this constitutes a foreign asset. It must be declared in your Wealth Statement under "Foreign Assets" at its PKR equivalent value on that date. If you fail to declare your crypto holdings and the FBR later discovers them (e.g., when you liquidate a large amount into your local bank), the FBR will invoke Section 111 (Unexplained Income or Assets). They will assume the entire value of the crypto portfolio represents hidden, untaxed black money and will demand tax on the full amount, plus a 100% penalty. --- The P2P Banking Trap and Section 176 Most Pakistani crypto traders use Binance P2P to liquidate assets. A trader transfers USDT to a buyer, and the buyer transfers PKR directly into the trader's local bank account. The Audit Risk From the bank's perspective, you are receiving frequent, large online transfers from random, unrelated individuals across Pakistan. This triggers Anti-Money Laundering (AML) flags. Furthermore, the FBR’s data systems monitor large bank deposits. If your declared salary is PKR 100,000 a month, but your bank account receives PKR 5 million in P2P transfers over the year, the FBR will issue a notice under Section 176, demanding you explain the source of the funds. Your Defense: If you have properly declared your crypto holdings in your Wealth Statement in previous years, and declared the trading profit under Section 39 in the current year, you can legitimately prove to the FBR that the PKR 5 million is simply the liquidation of a declared foreign asset. If you hid the crypto, you have no defense. --- Frequently Asked Questions (FAQs) Will the bank freeze my account if I declare crypto profits? Commercial banks operate under SBP rules, not FBR rules. If a bank definitively traces a transaction to a crypto exchange, they may freeze the account under SBP AML directives. This is why traders use P2P. However, filing taxes on P2P income protects you from the FBR, not necessarily from the bank's internal compliance department. Do I pay tax if I just hold the crypto and don't sell it? No. Income tax is only payable upon the "realization" of the gain (when you sell the crypto for fiat or exchange it for another asset). However, the value of the held crypto must still be reported in your annual Wealth Statement. Can I offset crypto trading losses against my salary income? No. Under Pakistani tax law, losses from one head of income (e.g., Other Sources) generally cannot be set off against Salary income. Crypto losses can only be set off against other income arising under the exact same head, subject to strict limitations. Is there a specific FBR tax rate for crypto? No. There is no "Crypto Tax Slab." The profits are simply added to your total net income and taxed according to your normal taxpayer status (Salaried or Non-Salaried business slabs).