Ishaan Nandkishore Awasthi (Darsheel Safary), the story's leading character, is an eight-year-old boy who dislikes school and fails every test or exam. He finds all subjects difficult, and is belittled by his teachers and classmates. But Ishaan's internal world is rich with wonders that he is unable to convey to others, magical lands filled with colour and animated animals. He is an artist whose talent is unrecognised.
Ishaan's father, Nandkishore Awasthi (Vipin Sharma), is a successful executive who expects his children to excel. His mother, housewife Maya Awasthi (Tisca Chopra), is frustrated by her inability to educate her son. Ishaan's elder brother, Yohaan (Sachet Engineer), is an exemplary scholar and athlete, which Ishaan is frequently reminded of.
After receiving a particularly poor academic report, Ishaan's parents send him to a boarding school. There he sinks into a state of fear and depression, despite being befriended by Rajan (Tanay Chheda), physically disabled and one of the top students in his class. Ishaan's situation changes when a new art teacher, Ram Shankar Nikumbh (Aamir Khan), joins the school's faculty. An instructor at the Tulips School for young children with developmental disabilities, Nikumbh's teaching style is markedly different from that of his strict predecessor, and he quickly observes that Ishaan is unhappy and contributes little to class activities. He reviews Ishaan's work and concludes that his academic shortcomings are indicative of dyslexia. On his day off, Nikumbh visits Ishaan's parents and asks if he can see more of their son's work. He is stunned by the sophistication of one of Ishaan's paintings, and tells his parents that Ishaan is a bright child who processes information differently from other children in his class, but Ishaan's father is suspicious that the explanation is simply an excuse for his son's poor performance. Nikumbh demands that he read some Japanese text on a box and berates him when he cannot, giving him a glimpse into Ishaan's experience of school. Nikumbh describes dyslexia to them and explains that it is not a sign of low intelligence. He tells them he can provide extra tutoring that will help Ishaan, highlighting the boy's artistic ability evident in his many paintings and other creative works.