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How Many Years ITR is required for a Home Loan

Updated: Aug 28, 2022
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In any home loan application, proper documentation is very important for quick and hassle-free approval of the housing loan amount.

You have to provide all the documents related to the house property you wish to purchase or construct and the financial documents to establish your ability to repay the home loan amount.

Some of the financial documents that lenders specifically look for are six-month bank account statements, latest salary slips, Form-16 and income tax returns or ITR.

The ITR is one such document, where the majority of home loan applicants confuse and fail to understand its importance in the home loan approval process.

In this article, we have compiled all the information related to ITR and know why ITR is mandatory for a home loan.

What is an Income Tax Return?

An income tax return is a form submitted to the Income Tax Department of India providing all the details related to your income, profits and gains from business and profession, income from house property, income from capital gains, and any income from other sources like dividend, interest income etc.

The ITR form is used to establish your total income tax liability for the last fiscal year and taxes to be paid during the year. If there are any tax refunds, you need to file an ITR to get the refund credited to your bank account.

An Income Tax Return acts as proof of income of an individual, which cannot be contested by any authority.

How Many Years’ ITR is Required for a Home Loan?

This is a common question of many home loan applicants, how much ITR is required for a home loan.

Most lenders ask for the last 2 years’ income tax returns from the applicant to establish their financial profile and creditworthiness. If you are unable to provide ITR, your home loan application may not be considered for approval or even accepted.

Your home loan eligibility also depends on the total income details provided in the ITR form. For example, a lender will not approve a home loan, if your income as per ITR is less or inadequate. Therefore, you need to decide accordingly on the home loan amount before applying.

What is the minimum ITR for a home loan?

While most lenders ask for the past 2 years’ ITR statements along with other documents to consider a home loan application, one must keep in mind that there are many factors that impact the eligibility for a home loan amount - such as age, income, credit score, income level, monthly expenses, and disposable income.

To know the maximum amount you can avail of a home loan based on your income and expense level, use the home loan eligibility calculator. The calculator will help you to calculate the maximum amount you can borrow and EMI on loan for your loan tenure.

Things to keep in mind while filing ITR

The following are the five things you should keep in mind while filing ITR:

1. Choosing the right ITR form:

There are seven different types of ITR forms depending on the taxpayer's income status, profession, resident status, etc. For instance, a salaried professional with an annual income less than Rs 50 lakh is required to file ITR-1. Similarly, a business professional with an annual income not exceeding Rs 50 lakh needs to fill ITR-4.

2. Verification of prepaid taxes with Form 26AS:

Verify the advance taxes paid including TDS with Form 26AS. If there are any discrepancies, necessary rectification should be made, which is essential for the seamless process of the income tax return.

3. Payment of balance taxes:

Once the taxable income is determined and tax liability is determined after claiming tax credits for prepaid taxes, applicable taxes should be paid before filing the tax return. If tax liability exceeds Rs 1 lakh, it should be paid within 31st July, even if the filing date gets extended.

4. Change of employment during the year:

If you have switched companies during the financial year, you should accurately provide all the income details. Based on consolidated Form 16 and 12BA issued by your currency employer, you can file ITR.

5. Mandatory disclosures:

You should make all disclosures related to your income from different heads, details of all bank accounts, schedule assets and liability, and foreign assets while filing an ITR.

Each lender has different requirements, therefore, before choosing a lender, know the minimum ITR for home loan needed to meet the eligibility and the ITR required for home loan if the loan amount is small.

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