We have investigated the suitability of Time-Dependent Density Functional Theory (TD-DFT) to describe vertical low-energy excitations in naked and hydrated titanium dioxide nanoparticles. Specifically, we compared TD-DFT results obtained using different exchange-correlation (XC) potentials with those calculated using Equation-of-Motion Coupled Cluster (EOM-CC) quantum chemistry methods. We demonstrate that TD-DFT calculations with commonly used XC potentials (e.g., B3LYP) and EOM-CC methods give qualitatively similar results for most TiO2 nanoparticles investigated. More importantly, however, we also show that, for a significant subset of structures, TD-DFT gives qualitatively different results depending upon the XC potential used and that only TD-CAM-B3LYP and TD-BHLYP calculations yield results that are consistent with those obtained using EOM-CC theory. Moreover, we demonstrate that the discrepancies for such structures originate from a particular combination of defects that give rise to charge-transfer excitations, which are poorly described by XC potentials that do not contain sufficient Hartree-Fock like exchange. Finally, we consider that such defects are readily healed in the presence of ubiquitously present water and that, as a result, the description of vertical low-energy excitations for hydrated TiO2 nanoparticles is nonproblematic.