Getting the Residential Status Wrong Costs More Than the Tax Itself
Every tax season, a familiar pattern shows up among NRIs filing their Indian returns: the number on the tax software looks fine, but the residential status entered at the top of the form is wrong. That single field decides whether global income gets taxed in India or just the India-sourced portion. Get it wrong and every other number downstream is built on a shaky foundation, refund included.
Residential status under Indian tax law isn’t about passport or visa category. It hinges on the number of days spent in India during the financial year and the preceding years, with separate thresholds for Indian citizens and persons of Indian origin who visit from abroad. Someone who spent an unusually long stretch in India during a particular year, for a parent’s illness or a sabbatical, can unknowingly cross into resident status and find their foreign salary or rental income suddenly reportable.
Capital gains are the other place things get messy. Shares, mutual funds, and property each carry different holding periods for what counts as long-term, and different tax treatment follows. NRIs selling Indian property often face TDS deducted at a rate meant for non-residents, which is usually higher than their actual tax liability, recoverable only by filing a return and claiming the refund.
Foreign assets and income, where applicable, need to be disclosed in the relevant schedule, and this obligation catches even those who assume a small overseas account doesn’t count. The reporting bar is about ownership and existence, not about how much tax is ultimately owed on it. Advisors at Ashutosh Financial Services see this misconception surface almost every year.
For anyone claiming tax credit for taxes already paid abroad under a Double Taxation Avoidance Agreement, the supporting form has to be filed before the return, not alongside it. Miss that sequence and the credit gets denied regardless of how legitimate the claim is. Ashutosh Financial Services has flagged this timing issue as one of the more avoidable filing errors among NRI clients.
None of this is about finding loopholes. It’s about filing an accurate return the first time, since revised filings invite more scrutiny, not less. Ashutosh Financial Services continues to run seasonal tax-awareness sessions aimed at helping filers get these details right before the deadline pressure sets in.
🎥 Watch the full video:
