1. What Income Is Taxable for Residents?
Everything starts with determining your residential status.
You cannot choose whether you want to file your return as an NRI or as a resident. Your residential status is determined strictly based on the number of days you stay in India, as prescribed under the Income-tax Act.
Depending on your stay in India, you may qualify as:
- Resident and Ordinarily Resident (ROR)
- Resident but Not Ordinarily Resident (RNOR)
- Non-Resident (NR)
If you are an ROR, your global income is taxable in India. This means you are required to report your worldwide income as well as your foreign assets.
If you are an NR, only the income that is earned or received in India is taxable. Generally, you are not required to report your foreign income or foreign assets in your Indian tax return.
If you are an RNOR, your Indian income is taxable. In addition, income derived from a business controlled from India or a profession set up in India is also taxable. Further, interest earned on an NRE account may also become taxable and should be reported wherever applicable.
Therefore, before preparing your return, always determine your residential status correctly.
2. Reporting of Foreign Income, Assets and Liabilities
The Income Tax Department now receives financial information from several countries through international information-sharing arrangements. In many cases, foreign financial information is also reflected in the Annual Information Statement (AIS).
This means the department closely monitors foreign income and foreign asset disclosures.
If you are an ROR, ensure that all foreign disclosures are complete and accurate. This is one of the most sensitive areas of income tax compliance.
Report all foreign income
This includes:
- Salary
- Pension
- Interest
- Dividends
- Rental income
- Capital gains
- Any other taxable foreign income
Whether the money remains outside India or is brought into India does not determine its taxability.
Report foreign assets correctly
Where applicable, disclose:
- Foreign bank accounts
- Shares
- Mutual funds
- Retirement accounts
- Foreign immovable property
- Other overseas financial assets
Also remember that Schedule FA follows the Calendar Year, not the Indian Financial Year. Many taxpayers overlook this important point.
Review your foreign retirement accounts
If you hold retirement accounts such as 401(k), IRA, or other eligible overseas retirement plans, do not ignore them simply because no withdrawal has been made.
Under Indian tax law, income may become taxable on an accrual basis. However, eligible taxpayers may file Form 10EE to defer taxation until the amount is withdrawn or redeemed.
Claim Foreign Tax Credit correctly
If tax has already been paid in another country, examine the applicable Double Taxation Avoidance Agreement (DTAA) and claim the Foreign Tax Credit wherever eligible.
Also ensure that Form 67 is filed whenever required.
Ensure consistency across all schedules
Foreign income should be reported consistently throughout the return.
For example, interest earned from a foreign bank account should appear in:
- Income from Other Sources
- Schedule FSI (Foreign Source Income)
- Schedule TR (Tax Relief)
- Schedule FA (Foreign Assets)
Incomplete or inconsistent disclosures may result in scrutiny and significant penalties.
Therefore, carefully review your foreign bank statements, broker statements, retirement account statements, and overseas tax documents before filing your return.
3. Don’t Rely Only on AIS for Capital Gains
The Annual Information Statement (AIS) is a useful reporting tool, but it should never be treated as your capital gains statement.
Common issues include:
- Purchase cost reflected as zero.
- Missing purchase dates.
- Incorrect classification of Short-Term and Long-Term Capital Gains.
- Wrong classification of equity and non-equity investments.
- Bonus issues, stock splits, mergers, and other corporate actions not properly reflected.
Always obtain the Capital Gain Statement from your broker or investment platform and reconcile it with AIS before filing your return.
4. Don’t Blindly Trust the Pre-filled Return
Many taxpayers believe that if the Income Tax Department has pre-filled their return, the information must be completely accurate.
That assumption can be costly.
Before filing your return, reconcile it with:
- Form 26AS
- AIS
- TIS
- Form 16 or salary certificates
- Interest certificates
- Capital Gain Statements
Remember, the responsibility for filing a correct return always rests with the taxpayer.
5. Select the Correct ITR Form and Tax Regime
Before filing your return, ensure that you have selected the correct ITR Form.
Many taxpayers continue using the same form every year without checking whether it is still applicable.
Similarly, don’t assume that either the Old Tax Regime or the New Tax Regime is automatically better for you.
Calculate your tax liability under both regimes before making your decision.
In many cases, the New Tax Regime results in lower tax because of its reduced slab rates.
However, if you are eligible for significant deductions and exemptions, such as House Rent Allowance (HRA) or Home Loan Interest, the Old Tax Regime may still be more beneficial.
Choose your tax regime only after proper comparison.
6. File Your Return Within the Due Date
The due date for filing the Income Tax Return for most individual taxpayers is 31 July.
Although a belated return may generally be filed up to 31 December 2026, delaying the filing can have several consequences.
You may have to pay:
- Interest
- Late filing fees
- Additional tax liability
Certain losses may not be allowed to be carried forward.
Your refund may also be delayed.
If you are claiming Foreign Tax Credit, timely filing becomes even more important.
Therefore, avoid waiting until the last moment.
7. Verify Your Return Within 30 Days
Filing your Income Tax Return is only half the process.
Unless your return is verified, it is treated as if it was never filed.
The simplest method is verification through Aadhaar OTP.
Other available options include:
- Net Banking
- Electronic Verification Code (EVC) through a bank account
- Digital Signature Certificate (DSC)
If electronic verification is not possible, print the ITR-V (Acknowledgement), sign it using blue ink, and send it to CPC, Bengaluru, within the prescribed time.
Conclusion
Remember, filing an Income Tax Return is not merely a legal requirement.
It is an opportunity to report your income accurately, make complete disclosures, and claim every benefit that the law permits.
A properly prepared return reduces the likelihood of future notices and gives you confidence that your tax affairs are fully compliant.
If you have any further questions or need assistance, feel free to reach out to us at admin@ushmaassociates.com or info@nricaservices.com, or contact us via call/WhatsApp at +91 9910075924.
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Disclaimer: Aim of this article is to give basic knowledge about the topic to people who are not in touch with Indian tax norms. When anybody is dealing with these kinds of cases practically, he shall consider all relevant provisions of all applicable Laws like FEMA/Income Tax/RBI /Companies Act etc.