The ITR required for home loan approval varies based on the home loan eligibility criteria of the lender but most lenders ask for a minimum 3 years ITR. While your income is one of the factors that affect your eligibility, there are other factors that come into play too. As a home loan borrower, you should also know about the deductions that you stand to get.
Keep the following in mind
Home loan tax benefits are applicable on both on the principal amount and the interest amount, which is influenced by the home loan interest rate.
- Deductions up to Rs. 2 lakh are allowed for interest repaid annually under Section 24.
- The entire interest repaid can be claimed as a deduction on the property which is let-out subject to a maximum of Rs. 2 lakh for a particular tax year.
- The principal amount repaid can be claimed for deductions up to Rs. 1.5 lakh under Section 80C.
- Deductions can be claimed on registration fees and stamp duty under Section 80C subject to a maximum of Rs. 1.5 lakh.
- Deductions for first-time homebuyers under Section 80EE can be claimed up to Rs. 50,000 in case certain conditions are fulfilled.
Also read: Know the income tax benefit on home loan
Frequently asked questions
Income tax returns are required to avail a home loan as they provide evidence of the borrower's repayment capacity and financial stability. Banks and financial institutions use income tax returns to assess a borrower's financial capacity to repay the loan and to evaluate their creditworthiness. Additionally, income tax returns also provide an overview of the borrower's financial history, such as employment status, sources of income, expenses, and other financial obligations. Therefore, income tax returns are considered a critical component of the home loan application process and are required by most banks and financial institutions.
Financial institutions typically require the last 2-3 years of Income Tax Returns (ITRs) when applying for a home loan. This includes both personal and, if applicable, business ITRs. Form 16 and other financial documents may also be necessary. Specific requirements may vary by lender and your financial situation.
It is highly unlikely to get a home loan without Income Tax Return (ITR) documents. In fact, ITR documents are crucial for availing any loan, including home loans, as they provide evidence of the borrower's repayment capacity and financial stability. Banks and financial institutions use ITR documents to determine the borrower's income and tax liability and to evaluate their creditworthiness.