The federal government is set to impose a capital gains tax (CGT) on cryptocurrency transactions as part of Budget 2026-27, sources told ProPakistani Pakistan, after consultations with the International Monetary Fund (IMF), has finalized a plan to expand the scope of Section 37 of the Income Tax Ordinance, 2001, to bring gains earned from cryptocurrency trading into the tax net. The proposed tax rate is expected to range between 20 percent and 30 percent, although a final decision is yet to be announced on Friday.

The federal government is set to impose a capital gains tax (CGT) on cryptocurrency transactions as part of Budget 2026-27, sources told ProPakistani

Pakistan, after consultations with the International Monetary Fund (IMF), has finalized a plan to expand the scope of Section 37 of the Income Tax Ordinance, 2001, to bring gains earned from cryptocurrency trading into the tax net. The proposed tax rate is expected to range between 20 percent and 30 percent, although a final decision is yet to be announced on Friday.

Sources said a high-level government committee has prepared recommendations covering both the taxation and documentation of cryptocurrency transactions, including mechanisms to identify and regulate unregistered market participants.

The move is aimed at developing a comprehensive framework for taxing digital assets while ensuring that investment flows are not excessively diverted from traditional sectors of the economy into cryptocurrencies.

Taxation of capital gains from virtual currency trading is considered the most straightforward aspect of the proposed framework, as such transactions are broadly comparable to securities trading.

The initiative comes amid growing calls for the regulation of Pakistan’s rapidly expanding digital asset market.

According to a report submitted by the Federal Tax Ombudsman (FTO) to the Federal Board of Revenue (FBR), there are approximately 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 (SBP) issued a circular in April 2018 warning financial institutions about the risks associated with virtual currencies, it did not explicitly declare cryptocurrencies illegal.

The FTO observed that substantial cryptocurrency-related commercial activity is currently taking place outside the country’s tax framework, resulting in significant undocumented and untaxed transactions.

The report criticized the absence of a regulatory and taxation mechanism for digital assets despite the sector’s rapid growth.

“Income, profits, and assets generated through cryptocurrency dealings must be brought within a documented and taxable framework,” the report stated, adding that a well-structured regime could help broaden the tax base and generate additional revenue for the government.

The tax policy unit of the Ministry of Finance has confirmed that the issue remains under consideration and is being examined in consultation with industry experts and other stakeholders.

Experts believe that while the legalization and regulation of digital assets are necessary, designing an effective tax framework presents significant challenges.

Policymakers must strike a balance between generating tax revenues and avoiding measures that could discourage innovation or trigger capital flight.

The taxation of cryptocurrency mining, staking rewards, yield farming, decentralized finance (DeFi) activities, non-fungible tokens (NFTs), and token issuance mechanisms such as Initial Coin Offerings (ICOs) and Initial Exchange Offerings (IEOs) presents additional complexities. Many of these activities involve non-fiat assets and transactions that do not pass through conventional banking channels.

Tax experts suggest that amendments to the Income Tax Ordinance, 2001, should formally classify crypto assets as specified financial instruments and establish clear rules for calculating taxable gains and losses, similar to those applicable to listed securities.

Under the proposals being discussed, gains on cryptocurrency disposals would be taxed on a realized basis using the First-In, First-Out (FIFO) valuation method. Tax rates could also vary according to the holding period of assets, encouraging long-term investment while discouraging speculative trading.

One of the most sensitive issues under consideration is the treatment of undeclared offshore crypto holdings. Many Pakistani investors reportedly opened cryptocurrency accounts using foreign addresses or offshore platforms due to the absence of a domestic legal framework in previous years.

Experts warn that imposing taxes without offering a transitional compliance mechanism could encourage asset concealment, capital flight, or the permanent loss of potential tax revenues. As a result, policymakers face the challenge of ensuring compliance while providing a practical pathway for the regularization of previously undeclared assets.

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