How to Report Airdrop Income in Pakistan: Your Complete Tax Guide

Understanding Airdrop Income in Pakistan

Cryptocurrency airdrops – free distributions of tokens to wallet holders – have become popular in Pakistan’s growing crypto ecosystem. When you receive an airdrop, it constitutes taxable income under Pakistani law. The Federal Board of Revenue (FBR) classifies crypto assets as “property,” meaning airdrops must be reported as income at their fair market value upon receipt. Failure to disclose can lead to penalties including fines up to 25% of evaded tax, audits, or legal action under the Income Tax Ordinance 2001.

Is Airdrop Income Taxable in Pakistan?

Yes. The FBR’s 2021 guidelines explicitly state that cryptocurrency transactions, including airdrops, are subject to taxation. Airdrops are treated as:

• Ordinary Income: Valued at market price when received
• Capital Gains: If held and later sold at a profit, taxed separately
• Business Income: For frequent traders or professional participants

Tax rates range from 0-35% based on your annual income slab. Even “worthless” tokens must be documented – if they gain value later, taxes apply upon disposal.

Step-by-Step Guide to Reporting Airdrop Income

1. Record Transaction Details
   Log the date, token name, quantity received, and fair market value in PKR at receipt time using reputable exchanges like Binance or LocalBitcoins.
2. Classify Your Income Type
   Determine if it’s casual income (one-time) or business income (repeated airdrops). Casual income uses different tax forms.
3. Convert to PKR
   Use the State Bank of Pakistan’s exchange rate on the receipt date for valuation.
4. File Through IRIS Portal
   • For casual income: Use Schedule I (Income from Other Sources) in your annual return
   • For business income: Include in business profit/loss statements
5. Report Capital Gains Separately
   If selling airdropped tokens later, calculate gains/losses using Form 142 (Capital Gains Statement).
6. Pay Taxes Due
   Submit payment via FBR’s e-payment system before the June 30 deadline for salaried individuals.

Essential Documentation and Compliance Tips

• Maintain Proof: Save wallet screenshots, exchange records, and blockchain transaction IDs for 6 years
• Use FBR’s Valuation Rules: If no market price exists, use the cost of acquisition method
• Declare Foreign Assets: Airdrops held in international wallets must be reported in Schedule FA
• Deduct Expenses: Claim transaction fees or operational costs if classified as business income
• Consult Professionals: Engage a FBR-registered tax advisor for complex cases

Frequently Asked Questions (FAQs)

Do I pay tax if I haven’t sold my airdropped tokens?

Yes. Tax liability arises upon receipt based on the token’s market value at that time. Selling later triggers additional capital gains tax.

What if the airdrop has no market value?

Report it at zero value initially. If it gains value later, tax applies only when you dispose of it.

Which tax form should I use for airdrop income?

Use Form 114 (Income Tax Return) with Schedule I for casual income or business income schedules for professional activities.

Can the FBR track my crypto airdrops?

Yes. Through the Digital Monitoring Unit and international agreements like CRS, authorities can trace transactions on centralized exchanges.

What penalties apply for non-compliance?

Up to 25% penalty on evaded tax, 17% annual interest, and potential criminal prosecution for severe cases.

Are DeFi airdrops treated differently?

No. All airdrops – whether from DeFi protocols, NFTs, or traditional cryptocurrencies – follow the same tax treatment under FBR rules.

Pro Tip: Use FBR’s free Tax Asaan app to calculate liabilities and file returns conveniently. Always reconcile crypto records with bank statements for audit readiness.