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NRI tax mistakes you might be making—and how to fix them

19 Jun 2025 by Team FinFIRST
tax rules
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Non-Resident Indians (NRIs) don’t usually set out to break tax rules. But all it takes is an old savings account, a forgotten FD, or one missed form, and suddenly, you're tangled in an NRI tax complication you didn’t see coming.

The biggest problem? You don’t know what you don’t know. Maybe a friend said a filing isn’t needed. Maybe no one told you about Form 67. But getting NRI tax rules wrong can cost you money, refunds, or other consequences.

Here’s how to avoid the most common slip-ups before they snowball.

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Misjudging your residential status
 

Before anything else, get this part right. Your residential status under Indian tax law decides what income is taxable, what forms you’ll need, and whether foreign income must be reported. It’s step zero of the NRI tax process and getting it wrong can complicate everything that follows.

 

What can go wrong

How to fix it

You assume you're an NRI the moment you move abroad

Under Income Tax Act rules, you're a resident –

  1. If you spend 182 days or more in India in the financial year; or
  2. If you spend 60+ days in the year + 365+ days over the last 4 years

You continue filing as an NRI in a year when you visited India too often

Tally your days in India for each financial year. Use a residential status calculator (available on tax portals) or consult a CA if you’re unsure

You don’t report global income in a year when your status changes to resident

If you're treated as a resident for tax purposes that year, you're required to report all income earned abroad to the Income Tax Department when filing your return

 

Your NRI tax status isn’t fixed—it resets every year based on your India visits. Before you file, invest, or plan anything, check your status first.

Using the wrong bank account type
 

Still using your old savings account after moving abroad? That’s not just outdated; it’s non-compliant. Your account type directly affects taxability, reporting, and fund transfers. It’s one of the most common NRI tax slip-ups and also one of the easiest to fix.

 

What can go wrong

How to fix it

You never told your bank you’re an NRI and kept using your regular savings account

Inform your bank and convert it to a Non-Resident Ordinary (NRO) or close your resident account. You may also open an Non-Resident External (NRE) account

You’re getting rent or FD interest in a resident account and facing issues sending it abroad

Use an NRO account to receive Indian income and repatriate funds legally with documents

You moved abroad but didn’t update your KYC or address with the bank

Submit new KYC documents like your passport, visa, and overseas address to keep your NRI banking accounts active

 

Fixing your account type isn’t just a technicality; it’s what makes the rest of your NRI tax journey far less stressful. If you’re unsure where to begin, banks like IDFC FIRST Bank offer quick NRO account conversions and expert assistance to keep you compliant from day one.

Thinking Indian income isn’t taxable
 

Many NRIs think their tax obligations end at the border. But if you’re earning from Indian FDs, rent, or dividends, you are expected to pay tax. This is where NRI tax confusion meets the fine print of India’s tax rules—and the role of the Double Taxation Avoidance Agreement (DTAA) gets misunderstood.

 

What can go wrong

How to fix it

You assume Indian income isn’t taxable since you live abroad

India uses source-based taxation—Indian income is taxed in India, no matter where you live

You don’t report interest from FDs or savings accounts held in India

Include this income when filing your ITR in India to stay compliant and avoid notices

You assume DTAA automatically exempts your Indian income from tax

DTAA may lower your tax, but only if you file the right forms and follow the process

You report only foreign income and skip Indian earnings entirely

Disclose all taxable Indian income, even if you’ve paid tax abroad—DTAA is not automatic protection

 

Living abroad doesn’t exempt you from taxes on income earned in India; it just changes the rules. Know them, follow them, and you’ll stay in the clear.

Ignoring DTAA formalities
 

DTAA doesn’t work on autopilot. To avoid double taxation, you must file the right forms at the right time. Miss a step, and you could end up paying full NRI tax anyway.

 

What can go wrong

How to fix it

You claim DTAA benefits without submitting any paperwork

File online filled Form 10F and upload it along with your ITR, especially if your income is eligible for lower tax

You skip filing Form 67, thinking DTAA relief is automatic

Form 67 must be submitted before filing your return if you want to claim foreign tax credit

You don’t get a Tax Residency Certificate (TRC) from your country of residence

Request a TRC from your home country’s tax department—it’s required to claim DTAA benefits

You file late or with missing DTAA details, and expect a refund

Make sure DTAA documentation is complete and on time—without it, claims can be rejected or refunds delayed

 

DTAA can lower your NRI tax, but only if you follow the rules that make it count.

Skipping Income Tax Return (ITR) filing without checking rules
 

Not earning a salary in India doesn’t always mean you can skip filing. If you have income here—rent, interest, capital gains—you may still need to file ITR. Missing a return can lead to penalties, lost refunds, and NRI tax trouble.

 

What can go wrong

How to fix it

You don’t file ITR because you don’t have a job in India

If your total Indian income exceeds ₹2.5 lakh, filing is mandatory—even without salary income

You miss out on a refund for TDS deducted on rent or interest

File your return to claim the refund and avoid leaving money on the table

You assume one missed return won’t matter

Repeated non-filing can lead to notices, penalties, and loss of credibility with the Income Tax Department

 

Skipping your return isn’t harmless; it’s a tax mistake that can cost you far more than just paperwork.

Why come to IDFC FIRST Bank for your NRI tax needs
 

Getting your NRI tax compliance right is easier when your bank is already a step ahead. That’s where the IDFC FIRST Bank NRI Banking services make a difference.

Here’s why thousands of NRIs trust IDFC FIRST Bank -

  1. NRO and NRE accounts simplify tax compliance and help manage savings efficiently
  2. Quick access to automated interest certificates for smoother filing
  3. Online banking, 24/7 account access, and expert support—no matter where you are
  4. Minimal documentation and an easy digital onboarding process
  5. Recognised among the World’s Best Banks 2025 by Forbes in partnership with Statista

Whether you're starting your NRI journey or just fixing past oversights, IDFC FIRST Bank helps you stay compliant and in control.

Be tax-ready, avoid penalties, and optimise your Indian income—start by getting your NRI tax basics right with IDFC FIRST Bank. Explore the bank’s NRI banking services now!

What makes IDFC FIRST Bank NRI Banking stand out?
 

  1. A comprehensive suite of NRE, NRO, and Seafarer Savings Accounts tailored for global Indians
  2. Earn interest daily and enjoy monthly interest payouts on your savings
  3. Attractive interest rates up to 7.00% p.a. on NRE and NRO Savings Accounts
  4. Tax-free returns on NRE Savings and Fixed Deposits for optimised wealth growth
  5. Flexible and fully repatriable NRE and FCNR Deposit options with assured returns
  6. Open accounts instantly and manage them seamlessly via our top-rated mobile banking app
  7. Higher ATM withdrawal limits, cashback benefits, and free VISA Signature Debit Card with no annual charges
  8. 24/7 seamless, zero-fee fund transfers and remittance solutions for convenient money management
  9. Access mutual funds, travel insurance, term insurance, and the FIRST WOW! Credit Card for a complete financial solution

Frequently Asked Questions

Can I keep my old Indian savings account if I live abroad now?

No. Once your residential status changes to NRI, you must convert your savings account to an NRO account or close your existing resident savings account.

Do I need to file ITR if I only have one NRO FD?

Yes, if the interest income exceeds ₹2.5 lakh in a financial year or if TDS was deducted and you want to claim a refund. Filing also helps if you're claiming DTAA benefits.

How is TDS calculated on NRO accounts?

TDS on NRO account interest is typically deducted at 30% plus surcharge and cess. This applies even if your total income is below the taxable limit, unless you’ve obtained a lower deduction certificate or claim a refund through your ITR.

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.

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