10 Common ITR Filing Mistakes NRIs and Residents Should Avoid

Filing an Income Tax Return (ITR) requires accurate income reporting, the correct residential status, and the appropriate ITR form. Even a small mistake can lead to processing delays, tax demands, interest, or notices from the Income Tax Department.

For Financial Year (FY) 2025–26, the corresponding Assessment Year (AY) is 2026–27. The usual 31 July 2026 deadline for eligible individuals has passed. The Income Tax Department has announced a separate extension to 21 November 2026 for a specified category of taxpayers; this extension does not automatically apply to every individual taxpayer. Check the official Income Tax Department portal for the deadline applicable to your return.

Whether you live in India or overseas, understanding common filing errors can help you avoid unnecessary complications. This guide covers 10 mistakes made by NRIs and Indian residents and explains how to avoid them.

Key Takeaways

• Your Indian income-tax residential status depends on statutory tests, not simply your visa, overseas address, or bank account.

• NRIs generally cannot use ITR-1; the correct form depends on income sources and eligibility.

• Foreign Tax Credit claims require appropriate documentation and compliance with the applicable Form 67 rules.

• The taxability of foreign income depends on residential status and the nature and source of income.

• Resident and ordinarily resident taxpayers may have foreign-asset disclosure obligations.

• Verify the applicable assessment year, reconcile income from all employers, and respond to tax notices promptly.

5 Common ITR Filing Mistakes NRIs Should Avoid

1. Declaring the Wrong Residential Status

Residential status is one of the most important factors in determining your Indian income-tax obligations. Under the Income-tax Act, 1961, residential status is generally determined using the applicable number-of-days tests and other statutory conditions.

For example, the general tests include staying in India for 182 days or more during the relevant financial year, or meeting the 60-day and preceding-four-year 365-day test. Exceptions and modified thresholds apply in certain circumstances, including to specified Indian citizens and Persons of Indian Origin visiting India.

Incorrectly classifying yourself as a resident, non-resident, or Resident but Not Ordinarily Resident (RNOR) can affect which income is taxable in India.

Common mistakes include:

• Assuming an NRE or NRO bank account automatically establishes non-resident tax status.

• Assuming that working overseas means no Indian tax return is required.

• Calculating days of presence without considering applicable exceptions.

• Confusing FEMA residential status with income-tax residential status.

How to avoid this mistake:

Maintain accurate travel records, including passport stamps, flight itineraries, and travel dates. Review the applicable residential-status rules before preparing your return.

Read the RNOR status guide to understand the distinction between non-resident and RNOR status. You can also review FEMA 1999, but remember that FEMA and income-tax residential status serve different legal purposes.

2. Filing the Wrong ITR Form

Selecting an ineligible ITR form can result in a defective return or a requirement to correct the filing.

ITR-1 is generally restricted to eligible resident individuals who meet its prescribed conditions. Non-resident individuals cannot use ITR-1.

The appropriate form depends on residential status, income sources, and other eligibility conditions.

Common applicability:

• ITR-2: Generally relevant to individuals and HUFs who do not have income chargeable under the head “Profits and Gains of Business or Profession,” subject to the form’s eligibility rules.

• ITR-3: Generally relevant to individuals and HUFs with business or professional income, subject to the applicable conditions.

Owning property, earning capital gains, receiving foreign income, or having other income sources can affect the correct form selection.

How to avoid this mistake:

Check the latest form instructions and eligibility criteria before filing. Use the official Income Tax Return downloads page to access the applicable forms and instructions.

For an overview of the process, read the Savetaxs guide to income tax returns.

3. Claiming Foreign Tax Credit Without Meeting Form 67 Requirements

NRIs and other eligible taxpayers may pay tax on the same income in more than one country. A Double Taxation Avoidance Agreement (DTAA) or the applicable domestic tax rules may provide relief, subject to eligibility and prescribed conditions.

Form 67 is used for specified Foreign Tax Credit (FTC) claims under the Indian income-tax rules applicable to the relevant year. Filing the form alone does not guarantee that the credit will be allowed.

Common mistakes include:

• Omitting foreign income or foreign tax details.

• Failing to retain proof of tax paid or deducted overseas.

• Reporting inconsistent amounts across the ITR and supporting documents.

• Missing the applicable deadline for submitting Form 67.

How to avoid this mistake:

Reconcile foreign income and taxes paid abroad before submitting your return. Review the applicable Form 67 requirements and submit the form within the prescribed timeline. Although certain cases have involved judicial relief for delayed compliance, taxpayers should not assume that late filing will be accepted.

Learn more about claiming DTAA benefits while filing ITR and Form 67 for Foreign Tax Credit claims.

For the latest procedure, consult the official Form 67 user manual.

4. Misreporting or Omitting Foreign Income

Not all foreign income is taxable in India for every taxpayer. The result depends on residential status, the nature of the income, where it is received or deemed to be received, where it accrues or arises, and the applicable provisions.

A non-resident is generally taxed in India on income received or deemed to be received in India and income that accrues or arises, or is deemed to accrue or arise, in India. The scope of taxable income differs for residents, including RNORs and residents and ordinarily residents.

Common mistakes include:

• Assuming that all overseas salary or investment income is automatically exempt in India.

• Ignoring the effect of residential status on foreign income.

• Failing to consider income received in India or income connected with India.

• Claiming foreign tax relief without maintaining supporting records.

How to avoid this mistake:

Identify each income source and determine its tax treatment under the rules applicable to your residential status. Keep overseas tax returns, income statements, bank statements, and foreign-tax payment records where relevant.

If you returned to India during the year or your residential status changed, review your circumstances carefully before deciding whether foreign income is taxable or reportable.

5. Ignoring Income Earned or Received in India

Living overseas does not automatically exempt Indian-source income from Indian tax. Depending on the applicable rules, NRIs may need to report income such as:

• Interest from NRO accounts.

• Rental income from Indian property.

• Capital gains from Indian property, shares, or mutual funds.

• Dividends from Indian companies.

• Other taxable income sourced in India.

Interest on eligible NRE and FCNR deposits may qualify for exemption when the statutory conditions are satisfied. NRO account interest is generally taxable in India, and tax may be deducted at source where applicable.

How to avoid this mistake:

Collect statements for Indian bank accounts, investment accounts, rental receipts, and property or securities transactions. Reconcile TDS certificates and other tax records before filing.

For account-specific information, review the NRO account guide, the NRE account opening service, and the NRO account opening service.

5 Common ITR Filing Mistakes Indian Residents Should Avoid

6. Selecting the Wrong Assessment Year

The financial year is the period in which income is earned, while the assessment year is the year in which that income is assessed and the corresponding return is filed under the applicable framework.

For example, income earned during FY 2025–26 generally corresponds to AY 2026–27 under the Income-tax Act, 1961.

Selecting the wrong assessment year can cause processing problems, incorrect tax calculations, or the need to correct the filing. It does not automatically result in double taxation, but it can complicate compliance.

How to avoid this mistake:

Confirm the financial year covered by your income records and select the corresponding assessment year when preparing the return.

For more information, read the Savetaxs explanation of the assessment year.

7. Failing to Combine Income From Multiple Employers

Employees who change jobs during a financial year may receive multiple Form 16 certificates. A common mistake is to report income from only one employer or overlook tax deducted by another employer.

Each employer’s Form 16 covers the salary and TDS information available to that employer. The employee must consider salary from all employers when preparing the annual return.

How to avoid this mistake:

• Collect Form 16 from every employer.

• Reconcile the salary amounts with payslips and the Annual Information Statement (AIS) and Form 26AS, where relevant.

• Check whether deductions or exemptions have been accounted for correctly across employers.

• Reconcile total TDS with the amount claimed in the return.

Do not simply add the tax figures from multiple Form 16 certificates without checking the underlying income and deductions.

8. Missing Eligible Deductions or Applying the Wrong Tax Regime

Taxpayers may miss deductions or exemptions for which they qualify, or claim benefits that are unavailable under their chosen tax regime.

The availability of deductions depends on the applicable provisions, the nature of the expenditure or investment, the taxpayer’s eligibility, and whether the old or new tax regime applies.

How to avoid this mistake:

Before filing, review eligible deductions, exemptions, and tax credits. Check the conditions and supporting documents for each claim rather than assuming that every investment or expense qualifies.

Compare the old and new tax regimes using your actual income and eligible benefits. Make sure the regime selected in the return is consistent with the applicable rules and any required election.

9. Ignoring Income Tax Notices and Communications

Ignoring a communication from the Income Tax Department can cause a straightforward discrepancy to become more difficult to resolve. Notices may relate to differences in reported income, TDS credits, tax payments, return processing, or other compliance matters.

How to avoid this mistake:

• Check your registered email address and the e-filing portal regularly.

• Read the notice carefully and note its response deadline.

• Compare the notice with your ITR, AIS, Form 26AS, and supporting documents.

• Submit a response or correction through the prescribed procedure.

• Seek professional assistance if the issue involves a complex tax position or significant demand.

Use the official Income Tax Department portal to verify communications and complete the required action. Do not ignore a notice simply because you believe the original return was correct.

10. Incorrectly Reporting Foreign Assets and Income

Foreign-asset reporting is an important compliance area for eligible resident taxpayers who hold overseas accounts, investments, or other reportable assets.

Resident and ordinarily resident taxpayers may have to disclose specified foreign assets and related income in Schedule FA and complete other relevant schedules, depending on their circumstances and the ITR form.

However, Schedule FA is not required in the same way for every residential category. The applicable ITR instructions generally do not require non-residents and RNORs to complete Schedule FA. Other disclosure or reporting obligations may still apply.

Common mistakes include:

• Assuming that an overseas asset does not need disclosure because it generated no income.

• Omitting foreign bank accounts, shares, or other reportable holdings.

• Confusing foreign-asset reporting with the taxability of income from those assets.

• Using the wrong ITR form or failing to complete the applicable schedules.

How to avoid this mistake:

Determine your residential status first. Then review the instructions for your applicable ITR form and identify the schedules required for your circumstances. Maintain statements and records of foreign assets, income, and taxes paid.

For the legal background, review the Savetaxs guide to the Income-tax Act, 1961 and verify the current form-specific instructions on the official portal.

ITR Filing Checklist for NRIs and Indian Residents

Before submitting your return, confirm the following:

• Your residential status has been determined correctly.
• You have selected the appropriate ITR form.
• The correct financial year and assessment year are selected.
• Income from all employers, bank accounts, investments, and other relevant sources is included.
• TDS and advance-tax credits have been reconciled.
• Foreign income and Foreign Tax Credit claims have been reviewed where applicable.
• Eligible deductions and exemptions have been checked under the chosen tax regime.
• Required foreign-asset and other disclosures have been completed.
• Any outstanding tax notices or discrepancies have been addressed.
• The return has been submitted and verified within the applicable deadline.

File Your ITR With Savetaxs

Accurate ITR filing requires more than entering income figures into a form. Residential status, foreign income, tax credits, deductions, and disclosure requirements can all affect your compliance obligations.

Savetaxs provides NRI income-tax services to help taxpayers understand their Indian filing obligations and prepare returns based on their circumstances.

If you have income in India and overseas, have recently returned to India, or are unsure about your residential status, consider getting your tax position reviewed before filing.

Need help with your ITR? Visit Savetaxs to explore the available tax services.

Conclusion

Avoiding ITR filing mistakes starts with understanding your residential status, selecting the correct form, reporting income accurately, and meeting the applicable compliance requirements. NRIs should pay particular attention to Indian-source income and foreign tax relief, while Indian residents should reconcile income from all employers, review eligible deductions, and complete required disclosures.

Review your records before submitting your return and verify the current filing requirements through the Income Tax Department. When your tax situation involves multiple countries or complex income sources, professional guidance can help you identify issues before they become costly problems.