It is essential to make a considerable financial investment whenever it comes to purchasing your dream home. And if you don’t have the requisite funds, a home purchase loan is always the best option. Thus, a home loan provides you with all the requisite funds that you require for purchasing a property.
Also, in addition to that, you are granted a longer tenure for repaying the amount. However, a home loan always comes with certain prerequisites on which your home loan approval entirely depends. And to prove your eligibility, you need to provide your lender with all the requisite documents. This will efficiently help in proving your creditworthiness.
Out of all the documents, Income Tax Returns are one such essential document. So before your loan is sanctioned, lenders will assess your creditworthiness and income level. And thus, ITR is highly crucial for verifying your home loan eligibility.
Today, in this article, you will get valuable insights regarding the importance of ITR while availing of a home loan. But first, let us check what ITR stands for and its significance. Let’s get started.
ITR – What is it?
ITR, better known as Income Tax Return, is a necessary and mandatory form that is required to be filled by individuals. It is also applicable to businesses whose income is significantly above the threshold limit. Nevertheless, experts believe that filing Income Tax Returns is a good practice for incomes below the threshold limit.
In other words, ITR comprises and indicates all information regarding your taxable income and those earned through business, properties, etc. Remember that an ITR comprises all financial information that took place within a particular financial year.
Why is an ITR Important?
Whenever it comes to the home loan process, an ITR plays a pivotal role. There are, in fact, various lenders who demand Income Tax Returns from Borrowers. If you are thinking of acquiring a home loan, you are also required to file an ITR. This will efficiently help in ascertaining your income and cash flow.
Listed here are some of the reasons why ITR is of primary importance:
Reflects Your Repayment Capacity
A lender can efficiently determine your credibility and repayment capacity through your Income Tax Returns. And if you have ever defaulted in ITR filing, your lenders will also consider that you will default in home loan EMIs.
Indicates Your Financial Stability
A lender can quickly determine your financial status and capability through an ITR. So, you must submit your ITR for the past three years whenever you acquire a home loan. This ascertains the lender whether you have a stable source of income. Also, they can determine whether you will be able to pay your EMIs at appropriate times.
How to File ITR?
If you are willing to file ITR for a home loan, you need to follow these steps:
- Firstly, visit the website and download your eligible form.
- Secondly, you need to fill in all the required fields with your details.
- Thirdly, you need to enter your income details under Gross Total Income according to Form 16.
- Fourthly, you must enter your applicable tax deductions under sections 80C, 80D, and more.
- Finally, follow the instructions mentioned below and provide your appropriate bank account details.
Whenever you think of applying for a home loan, make sure that you furnish your Income Tax Returns. Without ITR, your home loan application will likely get rejected. And if you ever face any difficulty in filling them all by yourself, you can acquire professional assistance. This will help in ensuring that your ITR is filed accurately and adequately.