Bismuth-triiodide has received remarkable attention because of its properties like low toxicity, wide band gap, high density, high attenuation coefficient, and defect tolerance for direct X-ray detection applications. The material has demonstrated promising X-ray detection results in polycrystalline films and single-crystal detectors. However, the inherent defects and voids in the structure of BiI₃ create recombination centers and decrease the charge collection in the detector. Over the last few years, BiI₃-polymer composites and BiI₃-based perovskites have been investigated for the defect tolerance to deliver high sensitivity, high SNR, and low detection limit. These composites and perovskites tailor the trap density in the BiI₃ and increase the density of shallow defects, which helps to improve the charge collection. In this review, we summarize the properties and limitations of BiI₃ and the role of deep and shallow defects in charge carriers’ transportation. The highlights of the recent developments in BiI₃-based composites and perovskites to address these challenges to yield high material performance for direct X-ray detection applications.