Living outside India does not automatically remove Indian tax responsibilities. At the same time, holding an OCI Card does not by itself determine whether someone is an NRI for Indian income-tax purposes. Tax residency is determined separately under the applicable tax law for the relevant tax year. This guide covers common mistakes involving residential status, Indian income, TDS, ITR selection, AIS, DTAA, foreign income, property and overseas remittances.
One of the most common mistakes is treating OCI status as a tax-residency status. An OCI Cardholder is a foreign national with an OCI status under India's immigration and citizenship framework; being an OCI Cardholder does not automatically make the person a non-resident for income-tax purposes.
For Indian income-tax purposes, residential status must be determined under the applicable tax provisions for the relevant tax year. A person may therefore hold an OCI Card while having a particular Indian tax-residency status based on their circumstances.
This distinction matters because residential status can affect the scope of income and reporting obligations in India.
Simply living abroad for most of the year is not always enough to determine tax residency.
For tax years beginning on or after 1 April 2026, residential status is governed by the Income-tax Act, 2025. For tax years beginning before 1 April 2026, the Income-tax Act, 1961 continues to govern residential status. The Income Tax Department confirms that the two Acts apply according to the tax year involved.
The calculation can also involve more than the number of days spent in India during one year. Special rules apply to certain Indian citizens and persons of Indian origin visiting India, and deemed-residency provisions can also be relevant in specific circumstances.
What to check: Keep an accurate record of your India travel dates and determine residential status under the law applicable to that particular tax year.
An OCI Card does not create a blanket exemption from Indian income-tax rules.
The tax treatment of foreign income depends on factors such as residential status, the nature of the income, and the applicable provisions. A person should therefore avoid deciding that foreign salary, investment income, pension or other overseas income is outside the Indian tax framework solely because they hold an OCI Card or live outside India.
Foreign-income reporting can also differ from foreign-asset reporting. These should not be treated as identical questions.
What to check: Establish tax residency first, then determine the taxability and reporting requirements for the particular type of foreign income.
Another frequent error is focusing on one source of income while overlooking others.
An overseas taxpayer may have several Indian income sources, including:
For example, an NRI receiving rent from an Indian property should not assume that the presence of TDS means there is nothing else to report. Similarly, interest credited to an Indian account should be reviewed according to the account type and applicable tax rules.
What to check: Prepare an annual list of Indian income sources before starting the ITR. Do not rely only on bank statements or one TDS certificate.
TDS is a tax collection mechanism, not necessarily the final calculation of a taxpayer's overall liability.
An NRI may have TDS deducted from interest, rent, property transactions, or other payments. The taxpayer should still review the underlying income, applicable deductions or exemptions, tax liability, and available tax credits before filing.
Form 16A is used for TDS on income other than salary and records the nature of the payment and tax deducted.
If the TDS appearing in the taxpayer's records does not match the taxpayer's documents, the discrepancy should be investigated rather than simply entering an assumed amount in the return.
What to check: Compare TDS certificates, AIS, and Form 26AS with your actual income and tax records.
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Consult an Expert TodayChoosing an ITR based only on being an NRI can lead to an incorrect filing decision.
The applicable return depends on the taxpayer's income and circumstances. For AY 2026–27, the Income Tax Department identifies ITR-2 for individuals/HUFs who do not have income from profits and gains of business or profession, while ITR-3 applies where business or professional income is involved, subject to the applicable eligibility conditions.
The correct form should therefore be selected after reviewing all sources of income and the applicable filing conditions.
What to check: Review the current ITR applicability criteria for the relevant assessment year rather than choosing a form solely because you are an NRI.
Filing without checking the tax information already available on the Income Tax Department's portal can create avoidable mismatches.
AIS contains broader information, including TDS/TCS, specified financial transaction information, tax payments, demand/refund information, and other reported data. Form 26AS provides tax-credit information, including TDS/TCS and other specified information depending on the applicable system and period.
An overseas taxpayer should compare these records with bank statements, TDS certificates, property documents and investment records.
If something appears incorrect, investigate the source of the discrepancy before filing rather than assuming that the information displayed by one system is automatically the final answer.
What to check: Reconcile AIS, Form 26AS, TDS certificates and your own financial records.
An NRI may be entitled to relief under a Double Taxation Avoidance Agreement (DTAA) in appropriate circumstances, but treaty benefits should not be assumed automatically.
The relevant treaty, type of income, taxpayer's residence in the treaty jurisdiction, and applicable documentation all matter. Depending on the circumstances, documentation such as a Tax Residency Certificate (TRC) and prescribed forms or information may be relevant.
The mistake is often assuming that simply paying tax in another country guarantees a particular treaty outcome in India.
What to check: Identify the relevant DTAA and verify the eligibility and documentation requirements for the specific income before claiming treaty relief.
Foreign income and foreign assets require careful treatment because reporting requirements can depend on residential status and the applicable return.
A blanket statement such as “all NRIs must disclose every foreign asset” is too broad. Likewise, assuming that no foreign information ever needs to be reported simply because someone lives outside India can also be incorrect.
The applicable schedules should be reviewed for the taxpayer's residential status and return. Current Income Tax Department guidance distinguishes the requirements applicable to different residential categories.
Foreign tax credit is another area where documentation matters. Where a taxpayer is eligible to claim credit for foreign tax paid, Form 67 can be relevant under the applicable rules. The Income Tax Department states that Form 67 is used to claim credit for foreign tax paid and must be furnished within the prescribed timeline.
What to check: Determine residential status first, identify the applicable foreign-income and asset schedules, and retain evidence of foreign income and taxes paid.
Selling Indian property or investments can create tax and documentation issues that are easy to overlook.
Before completing a significant transaction, an NRI should review:
For Indian property transactions, the seller should not assume that the amount of TDS deducted automatically represents the final tax liability.
What to check: Review the transaction before completion, particularly where the amount is substantial or the ownership history is complex.
A transfer of money between India and another country should not automatically be labelled taxable or tax-free without examining what the payment represents.
For example, a remittance can involve different underlying circumstances such as income, investment proceeds, property-related funds, gifts or repayment of funds. The tax treatment and reporting requirements depend on the nature of the transaction.
Where a payment to a non-resident is chargeable to tax, Form 15CA and, in specified circumstances, Form 15CB may be relevant. The Income Tax Department explains that Form 15CA provides information for payments to non-residents and that Form 15CB is an accountant's certificate used in specified taxable-remittance situations.
For tax years governed by the Income-tax Act, 2025, corresponding new forms may apply, so the applicable tax year and current form requirements should be verified before making a cross-border payment.
What to check: Determine the nature of the remittance and applicable tax/reporting requirements before transferring funds.
A simple pre-filing review can reduce many avoidable errors:
[Insert image: NRI and OCI tax compliance decision tree showing OCI status → determine tax residency → identify Indian income → review foreign income/assets where applicable → select reporting requirements | Alt text: "Decision tree for checking Indian tax compliance as an NRI or OCI Cardholder"]
For complicated residential-status questions, substantial property transactions, foreign tax credits, DTAA claims, or cross-border transactions, consider having the records reviewed by a qualified Indian tax professional before filing.
The most common tax mistakes made by NRIs and OCI Cardholders often begin with an incorrect assumption: that living abroad or holding an OCI Card automatically determines the person's Indian tax position. It does not.
The safer approach is to determine residential status for the relevant tax year, identify all applicable Indian income, reconcile TDS and tax records, review foreign-income and asset reporting requirements, and verify DTAA or foreign-tax-credit claims before filing.
Indian tax rules and filing forms can change, particularly during the 2026 transition to the Income-tax Act, 2025. For complex or high-value situations, current Income Tax Department guidance and professional tax advice should take precedence over general online explanations.
The most common mistakes in filing income tax for NRIs include missing deadlines, using the wrong ITR form, errors in personal or bank details, and failing to report all income.
You should file the Income Tax Return on time, pay all your due taxes, report your income correctly, and verify your ITR after filing it.
To correct a tax filing mistake, you can use the revised return option on the income tax portal before the completion of the assessment year or 31st December of the assessment year, whichever is earlier.
The individuals rarely face prosecution for such genuine mistakes. You can voluntarily use ITR-U to correct your errors in past returns. The income tax department always prefers voluntary compliance over criminal prosecution for such mistakes.
Usually, you should not convert to the new tax regime for a home loan. If you are going to claim an interest deduction under section 24(b), then the old regime is better to file ITR. You can also choose by calculating both scenarios annually as the principal amount of the loan reduces over time.
Generally, the due date for filing the income tax returns every year is 31st July. For those individuals who do not require audits, the due date can be changed.
No. OCI status and Indian income-tax residency are separate concepts. Tax residency must be determined under the applicable tax rules for the relevant tax year.
Yes. Living outside India does not by itself eliminate Indian tax consequences for income that is taxable in India. The nature of the income and the applicable provisions must be examined.
Yes. AIS can contain information reported to the Income Tax Department from different sources. Checking AIS and reconciling relevant information with your own records can help identify discrepancies before filing.
Compare the reported amount with the relevant TDS certificate and your financial records, identify the deductor or reporting source responsible for the discrepancy, and take the appropriate corrective steps before finalising the return.
Vipul Jain is the Co-Founder of Visament, a trusted platform dedicated to simplifying Indian immigration, consular, and NRI services for applicants across the globe. With extensive expertise in OCI cards, Indian passport services, visa assistance, apostille and document legalization,... See Full Bio
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