How to Report Crypto Income in Pakistan: Your 2023 Tax Compliance Guide

Understanding Crypto Taxation in Pakistan

With cryptocurrency adoption rising in Pakistan, the Federal Board of Revenue (FBR) now requires taxpayers to declare crypto earnings. While digital assets aren’t legal tender, profits from crypto transactions are considered taxable income under the Income Tax Ordinance 2001. Failure to report can lead to penalties, making compliance essential for traders, miners, and investors.

Types of Crypto Income You Must Declare

Pakistan’s tax authority expects reporting of all crypto-derived profits, including:

• Trading gains: Profits from buying/selling cryptocurrencies
• Mining rewards: Value of coins earned through mining operations
• Staking income: Rewards received for validating transactions
• Airdrops & forks: Free token distributions or chain splits
• NFT sales: Profits from non-fungible token transactions
• Crypto payments: Income from goods/services paid in cryptocurrency

Step-by-Step Guide to Reporting Crypto Income

1. Maintain Detailed Records

Track every transaction with dates, amounts, wallet addresses, and exchange records. Use crypto tax software or spreadsheets to log:

• Purchase price and sale price
• Transaction fees
• Fair market value in PKR at transaction time

2. Calculate Taxable Income

Compute net profit using this formula:

Profit = Selling Price – (Purchase Cost + Transaction Fees)

For mining/staking: Declare full PKR value at receipt time as ordinary income.

3. File Through IRIS Portal

1. Register/login at FBR’s IRIS portal (iris.fbr.gov.pk)
2. Select relevant income tax return form (typically for salaried or business persons)
3. Declare crypto profits under “Income from Business” or “Other Sources”
4. Pay calculated tax via approved banks/online methods

Essential Documents for Crypto Tax Filing

• Exchange transaction histories (Binance, LocalBitcoins etc.)
• Wallet statements showing transfers
• Bank statements for fiat conversions
• Mining pool payout records
• Market price screenshots for valuation dates

Common Reporting Mistakes to Avoid

• Ignoring small transactions: All gains must be reported regardless of amount
• Forgetting cost basis: Deduct original purchase costs to avoid overpaying tax
• Mixing personal & business wallets: Maintain separate accounts
• Using USD values only: Always convert to PKR using SBP exchange rates

Penalties for Non-Compliance

Failure to report crypto income may result in:

• 10-25% penalty on unpaid tax
• Additional 1% monthly interest
• Audits and legal proceedings
• Criminal charges for severe evasion cases

Frequently Asked Questions (FAQ)

Is cryptocurrency legal in Pakistan?

While not banned, crypto isn’t legal tender. The State Bank prohibits financial institutions from processing transactions, but individuals can legally hold/trade assets with tax obligations.

What tax rate applies to crypto profits?

Profits fall under normal income tax slabs (0-35% based on annual income). Businesses pay corporate rates up to 29%.

Do I pay tax on crypto-to-crypto trades?

Yes. Every trade is a taxable event. Calculate PKR value at trade execution and report gains.

How do I value airdropped tokens?

Use fair market value in PKR when tokens become accessible in your wallet as taxable income.

Can I deduct crypto losses?

Yes. Capital losses can offset capital gains in the same tax year, reducing taxable income.

When is the crypto tax deadline?

Follow standard income tax deadlines: December 31 for businesses, September 30 for individuals (unless extended).