Common ITR Filing Mistakes NRIs and Indian Residents Make

For NRIs and Indian Residents, the due date of filing an income tax return for the financial year 2024-2025 (AY 2025-2026) is September 15, 2025. Filing income tax returns is mandatory when you have to file a return or have an annual income of more than ₹ 2,00,000, however, this limit has now been increased to ₹ 3,00,000 as per the new tax regime. Delaying the filing of an ITR can result in significant penalties, and making mistakes while filing an ITR also contributes to the delays and penalties individuals face.

In this blog topic, we will discuss 10 common mistakes made by NRI and Indian citizens when filing their ITR, and guide how to avoid them.

Mistakes NRIs Make While Filing ITR

Below are the top 5 mistakes NRIs make while filing an ITR

1. Declaring Wrong Residential Status

Although this is the starting point, it is also where many NRIs go wrong. The residential status under Indian taxation law determines whether your global income is liable to taxes in India or not. It is never about where you reside currently, but rather the number of days you have spent in India for a financial year.

Here is What People Assume:

• I have an NRI account, so I might be an NRI
• I work abroad, so Indian tax laws do not apply to me
• I visited India for less than 6 months, so I am safe.

But this is not how it works because, according to the Income Tax Act of India, you are considered an NRI if you have stayed in India for less than 182 days during a financial year or if you were in India for less than 60 days in that year. For the last four years, you have stayed in Idnai for less than 365 days. A miscalculation of even one single day can change your residential status from an NRI to an indian.

So Here is How to Avoid this Mistake:

• You must be very attentive while counting your days in India, maybe by using travel logs or passport stamps.
• If you're unsure about this whole residential status aspect, take help from an NRI-specific tax advisor or a CA.
• And last but not least, please do not confuse the FEMA NRI status with the rules of the Income Tax Act, as they are distinct.

2. Filing the Wrong ITR Form

One of the most common income tax filing mistakes NRIs make is choosing the wrong ITR form. They usually end up choosing the ITR-1 (Sahaj), but this ITR form is only for Indian residents who have their income from sources such as a single house or property, salary, or other sources.

If you file the wrong form, your income tax returns may be invalid and processed incorrectly. Apart from this, you can also get a notice from the Income Tax Department of India.

How to Avoid: Read the eligibility criteria carefully before choosing the IRE form, and it is advisable to seek guidance from an NRI-specific expert.

• ITR 2: If you are an NRI whose income is from sources like one house or property, salary, capital gains, and other sources (except income from business), you must choose ITR-2.
• ITR 3: This form is for NRIs whose income in India is from business or profession.

3. Claiming Foreign Tax Credit Without Filing Form 67

NRIs are required to submit two documents from their country of residence and one from India, all from the same income source. However, as India has signed double taxation avoidance agreements with many countries, this agreement allows you to pay taxes in only one country, thereby avoiding double taxation. However, he stated that NRIs can only claim the relief under the DTAA when they file Form 67 before submitting their income tax returns.

Common Errors Are:

• NRIs file Form 67 to claim FTC after they have filed their Income tax return, which is not valid and results in rejection of FTC.
• Miss details in the form, like foreign income breakup, taxation, or taxes paid abroad.

How to Avoid Them:

• Ensure that you file Form 67 before filing your income tax return.
• Take the help of a CA that will correctly file your FTC because, without Form 67, your foreign tax paid will not be considered, even if the double taxation agreement allows it.

4. Misreporting or Skipping the Foreign Income.

NRIs often believe that because they have earned a foreign income, it does not need to be reported in their ITR; however, this is not always the case.

How to Avoid: You do not have to report foreign income in India if you are a non-resident and you have earned or received income outside India.

But you should report it if you're an RNOR or a resident. If the foreign income received in an Indian bank account has a tax link to India through DTAA, or if you have repatriated income or capital gains from foreign assets, the income is subject to tax in India.

Whenever in doubt, report it; you can claim exemption to the FTC later on (if applicable).

5. Ignoring Income From India

NRIs living abroad and generating income in India are taxable. Many non-resident Indians also assume that their NRE account interest or other income is exempt from tax.

Here is what you must report:

• Interest earned on NRO account
• Rental income from property in India
• Capital gains (long-term capital gains or short-term) are generated from the sale of Indian shares, property, or mutual funds.
• Received dividends from the Indian company.
• Any other income received or earned in India.

Interest earned on an FCNR or NRE account is exempt from tax in India, but for an NRO account, you must report it.

Mistakes Indian Residents Make While Filing ITRs

Below are five common mistakes Indian Residents make while filing ITR

1. Choosing the Wrong Assessment Year

Whenever an individual files the ITR, they may incorrectly select the wrong assessment year, resulting in double taxation and unnecessary penalties.

How to Avoid: Whenever you choose an assessment year, ensure it is correct. For example, for the financial year 2025-2026, the accurate assessment year is 2026-2027.

2. Form 16 for Two or More Employers

It usually happens when a taxpayer changes jobs; they often end up with different Form 16s from each employer while filing their income tax return. When an individual files their income tax return with multiple Form 16s, it can be tricky, and one may not know how to do it correctly. And these are the cases where taxpayers have to aggregate their income from both employers under their income from salary.

How to Avoid: If an individual is unsure about how to file their income tax return with multiple Form 16s correctly, they should seek professional assistance from an expert.

3. Missing From the Available Deductions

There are certain deductions available to individuals filing tax returns, including expenses, donations, and certain types of income. Such deductions help the taxpayer lessen the burden of their tax liability by reducing their total tax liability. People often miss such deductions because of a lack of proper knowledge and guidance.

How to Avoid: Figuring out how much can be claimed from a particular source is tedious, and hence, one needs the guidance of an expert to determine all the possible deductions the taxpayer can claim.

4. Ignoring Communications and Legal Notices

Taxpayers often ignore legal notices and communications from he income tax department, which leads to heavy penalties and legal action taken against the concerned person.

How to Avoid: Respond to every communication or legal action promptly and take all necessary corrections if there are any additional taxes to be paid or discrepancies.

5. Not Disclosing liability Details and Foreign Assets

According to the Income Tax Act of 1961, primarily resident Indians and ordinarily resident Indians are required to report their foreign assets, accounts, income, and shares in Schedule FA of the ITR in a specified format. The taxpayer believes that if the income is not taxable in India, then they should not have to report it; however, this is where the mistake is made.

How to Avoid: Regardless of whether the income is taxable in India, the taxpayer must report their foreign income, accounts, shares, assets, and other relevant details to the relevant authorities. In the ITR, there is a schedule for Foreign Assets (FA), which requires the taxpayer to enter all details of foreign shares, mutual funds, employee stock options (ESOPs) of foreign companies, and other relevant information.

File your ITR with Savetaxs and Maximize Your Refunds

ITR filing for NRIs in India can feel overwhelming because the Indian tax law might feel like a maze, which is tough to escape, and this is why, due to a lack of knowledge and guidance, taxpayers are prone to make mistakes while filing ITR, which results in penalties and notices, but not anymore. Experts at Savetaxs are here to rescue from the ocean of penalties, mistakes, and stressful ITR filing sessions.

As a leading firm, we have been helping NRIs like you file their ITRs for over a decade, and our satisfied client base speaks volumes. Our experts bring over 30 years of experience in Indian and foreign tax laws, ensuring a smooth ITR filing process. We handle it all, from choosing which form to file to entering all your details, verifying all the documents, and filing your ITR form, while keeping the whole process transparent with you so you exactly know what is happening.

Savetaxs is that one mate every NRI deserves because let us be honest, there are more important things to do rather than stressing over an ITR form. You focus on what's important, and we handle all the mundane tasks with unmatched expertise.