How Much ITR Required for a Home Loan?

With the increasing price of real estate, it is challenging for many people to buy a home without a Home Loan. But when applying for a Home Loan , you must produce a set of documents and the application form. The document requirements for Home Loans vary from one lender to another.A few standard proof requirements are identity proof, address proof, income documents and employment details. You must produce your Income Tax Return (ITR) for a Home Loan if you're a taxpayer. Based on the papers you submit, the lender assesses your eligibility and decides whether to offer you a Home Loan.Also read: What is Home Loan? - All You Need to Know About Housing Loan

Income Tax Return or ITR is a form that individuals and entities file with the tax authorities to report their income earned during a financial year and the taxes paid.Submitting an ITR provides the government with information about an individual or entity's income and tax liability, allowing them to reconcile and identify any disparities between the taxes paid by the taxpayer and the taxes owed to the government. Filing an ITR is mandatory for individuals and entities whose income exceeds a certain threshold per the Income Tax Act.

Your ITR is a crucial income document for Home Loan approval as it reflects your income, the tax amount paid, and other personal financial information. However, it's not impossible to get a Home Loan with a low CIBIL score and without an ITR.Nowadays, most lenders offer Home Loans without ITR to people whose income is below the taxable limit. To become eligible for these special loan programmes, you should meet the eligibility criteria set by lenders.The reasons why lenders ask for your ITR documents are:

• Based on your ITR documents, lenders assess whether you have sufficient disposable income to repay the prospective loan.
• You must produce ITR documents for specific years when applying for a Home Loan. It helps lenders evaluate how stable your source of income is. A steady source of income reduces the lender's risks as there is less chance of default.
• Regularly filing ITR shows you're financially responsible and maintain transparency in your financial affairs. This impacts your loan application process positively.

Paying EMIs on your Home Loan on time is a huge responsibility. A delay in EMI payment can attract a late payment fee. It increases your interest burden and hurts your CIBIL score as well. Hence, you can now consider a Home Loan with an overdraft facility to reduce this burden.

The minimum ITR for Home Loans varies with the lender. Usually, banks and housing finance companies ask for 2-3 years of ITR for Home Loans. However, this requirement can change with the type and amount of the loans you have applied for.Also read: How an Equitable Mortgage Works

Seven types of ITR forms are issued by the IT Department, and you must select the correct form depending on your income level and sources of income. They are as follows:

ITR-1

This form is also known as the Sahaj form. It is for individuals with income less than ₹50 lakhs from salary/pension, one-house property, or other sources.

ITR-2

If your income is above ₹50 lakhs, you must fill ITR-2. Here, the sources of income can be salary, more than one house property, foreign income, capital gains, foreign assets, shares of an unlisted company or holding a company's directorship.

ITR-3

You must fill ITR-3 if your income is more than ₹50 lakhs and your source of income comprises one or more of the following:

• Salary
• Capital gains
• More than one house property
• Foreign income/asset
• Crypto income
• Business/partnership firm
• Holding directorship in a company
• Shares of unlisted company

ITR-4

The ITR-4 form is for individuals and Hindu Undivided Families (HUFs) with a total income of less than ₹50 lakhs. This form is applicable if their source of income comprises one or more of the following:

• Salary/pension
• One house property
• Other sources
• Presumptive income

ITR-5

Form ITR-5 applies to firms, LLPs, Association of Persons (AOPs), and Body of Individuals (BOIs).

ITR-6

Companies not claiming exemption under Section 11 can fill ITR-6.

ITR-7

It is applicable for people and companies under Section 139 (4A), (4B), (4C), and (4D).Also read: How the Prime Lending Rate Influences Your Home Loan Interest Rate

Step 1

Collect all necessary papers required for filing the ITR. It includes your salary slip, bank statements, investment-related documents, etc.

Step 2

Check which category you belong to as per the IT department and select the ITR form accordingly. If you file your ITR incorrectly, the IT department will reject your return.

Step 3

Fill in your personal details and income correctly. Remember to include income from all sources, such as FDs, Mutual Funds, and other investments. Compute your gross income by adding the income earned from all sources. If you're eligible for tax deductions, enter all applicable deductions correctly.Compute your total income by subtracting the total deductions from gross income. Your total income will determine your tax liabilities.

Step 4

Before submitting the ITR, ensure you have entered all information correctly and accurately.

Step 5

After verification, submit the ITR form. You can submit the ITR form online or offline. Submit the form at an income tax office if making an offline submission.After submission, you will receive an acknowledgement from the IT Department.

ITR is one of the primary documents to assess your loan eligibility. It provides crucial information about your income and financial stability. However, it's not the sole deciding element for getting approved for a Home Loan.Apart from ITR, lenders also check other factors, such as CIBIL score, property valuation, debt-to-income ratio, etc., while assessing Home Loan eligibility. The lender's internal policies are also crucial in determining the loan amount.

• Like other loans, Home Loans have advantages and disadvantages . Understand them before taking out a Home Loan.
• There are different types of Home Loans available in the market. Select the appropriate type based on your needs and preferences.
• While taking a Home Loan, you must submit the sale deed of the property , along with other documents, to the lender. The sale deed will remain with the lender throughout the loan tenure.
• Apply with a co-applicant to increase your loan amount. Ensure the co-applicant has a good credit history.
• In addition to interest rates, several additional expenses are associated with Home Loans. It includes processing fees, administrative charges, foreclosure charges , etc. Read the loan terms carefully to understand them.
• Home Loans are available with various repayment tenures. A longer tenure ensures a low EMI burden.
• Buying an insurance plan when availing of a Home Loan makes sense. If anything unexpected happens to you during the loan period, the insurance company will cover the outstanding loan amount.

If your total annual income exceeds the specified threshold the Income Tax department sets, you must produce an ITR for a Home Loan. You need to submit 2-3 years of ITR for Home Loans. Based on your ITR, the lender will check whether your existing income is sufficient to repay the loan under consideration.While assessing your Home Loan application, lenders check other factors, such as age, existing financial obligations, credit score, etc. Check your loan eligibility to own the home you truly deserve.