Several cryptocurrency investors in Ahmedabad are receiving income tax notices even after filing their returns and declaring their crypto earnings, leading to confusion and anxiety among taxpayers.
The issue has gained prominence as Ahmedabad has entered India’s top 10 crypto-investing cities for the first time. Tax experts say many investors have been asked to explain crypto income that was already disclosed in their returns. Officials attribute this to the complex nature of crypto transactions, which are often carried out through offshore exchanges and private wallets, making verification difficult.
According to CoinSwitch’s Q3 2025 report, Ahmedabad ranks 10th among India’s leading crypto-investing cities, highlighting the growing interest in digital assets, especially among the city’s youth. However, this growth has also brought crypto investors under increased scrutiny from the income tax department. In a presentation to the parliamentary standing committee on finance, officials flagged virtual digital assets as high risk due to their anonymous and borderless nature.
Officials noted that cryptocurrencies allow funds to move across borders within seconds without involving banks or regulated financial institutions, making tax tracking and enforcement challenging.
Under government rules, crypto trading is permitted only on Financial Intelligence Unit (FIU)-recognised exchanges. CA (Dr) Jainik Vakil said that even when income is declared, tracking crypto transactions remains difficult, particularly when investments are made through overseas platforms and private wallets.
Income tax officials added that many crypto exchanges operate outside India and several are not registered with the FIU, limiting the department’s ability to verify transactions, issue summons, or collect tax deducted at source. They also expressed concern over the misuse of cryptocurrencies for money laundering and terror financing. An official explained that in some cases, money is sent abroad through hawala channels and later routed back into crypto wallets in small amounts, leaving no clear trail.
CA Rushabh Shah, president of the Chartered Accountants Association Ahmedabad, said even compliant investors are facing repeated scrutiny. “Many people invested in crypto before clear regulations were in place. They have now disclosed the income and paid tax, yet notices continue due to limited clarity and restricted access to transaction-level data,” he said.
As of 2025, around 119 million Indians—about 8.2 per cent of the population—own cryptocurrency, with nearly 72 per cent of investors under the age of 35.
With Ahmedabad’s crypto activity growing rapidly, experts advise investors to maintain detailed records, warning that filing income tax returns may not end scrutiny when it comes to digital assets.