Opting for a home loan is a great way to fulfil your dream of owning a home. However, there are one too many documents proofs you need to avail one. These include income proof, personal details, bank statements, and more. Income Tax Returns (ITR) is one such essential document.
Lenders need to assess your income level and creditworthiness before sanctioning the loan. As a result, ITR is a crucial document to verify your home loan eligibility.
Read on to understand the importance of filing an ITR to get a loan.
What is ITR?
Simply put, ITR is an acknowledgment of the applicable taxes to the Income Tax Department and your earned income for a particular financial year. Based on the source of income and eligibility, there are seven types of ITR issued by the IT department –
- ITR 1- For individuals with earnings less than Rs. 50 lakhs from pension, salary, or one hose property
- ITR 2 – For individuals with earnings more than Rs. 50 lakhs from salary, foreign income, pension, capital gains, etc.
- ITR 3 – For people with an income of more than Rs. 50 lakhs from salary, pension, more than one house property, business or partnership firm, etc.
- ITR 4 – Income from ITR 1 and other income of more than Rs. 50 lakhs
- ITR 5 – This form is valid only to associations, LLPs, firms, and bodies
- ITR 6 – Applicable to companies not claiming exemption under Section 11
- ITR 7 – Valid for individuals or companies under Section 139 (4A), (4B), (4C), (4D)
Additional Read: How To Show Housing Loan Interest In Your ITR?
Why do you need to file ITR for home loan?
When you apply for a home loan, the lender asks for your ITR to evaluate your income level and repayment capacity. Usually, they need your ITR for the last three years.
Furthermore, if you are a business owner, the lending institution will require audited financial statements before proceeding with your application. In such a case, your ITR must be filed to get your financial documents audited.
However, your income level isn’t the only aspect that determines your loan eligibility. Lenders also consider various factors including age, credit history, CIBIL score, among other things. Therefore, some financial institutions also offer loans without an ITR. So, you must get in touch with your lender to know about the requirements beforehand.
How to file ITR?
To file ITR for home loan, follow these steps –
- Visit the official website and download the form you are eligible for.
- Fill in your personal details including your Aadhaar card, PAN card, date of birth, email address, etc.
- Enter your income details under the head of Salaries/Gross Total Income as per Form 16.
- Enter your applicable tax deductions applicable under sections 80C, 80D, and more.
- Follow the instructions and provide your bank account details.
Additional Read: 5 Tips to File Your Income Tax Returns on Your Own
Looking for a housing loan?
If you’re looking for a housing loan at affordable home loan interest rates, visit Tata Capital. We offer quick loans with minimal documentation and speedy processing. You can also enjoy convenient repayment plans and extended loan tenures for a comfortable repayment journey.
Plan your EMI using our home loan EMI calculator and get started today!