Providing all the required documents is of paramount importance when applying for a home loan. A lender assesses your creditworthiness basis your documents and calculate if they should lend you money. Probably, this is why home loan applications are rejected often, if the documents are incomplete or contain false information. One of the documents that lenders ask you to submit mandatorily is income proof that includes income tax returns. Experts opine that the lenders can reject your loan application if you fail to provide your ITR.
To know the importance of ITR for a home loan application, read on.
What Is an ITR?
An income tax return or ITR is a form where you file or input information related to your income and taxes. It is mandatory to file income tax returns for people whose income is above Rs 2.5 lakhs. However, experts opine that filing IT returns is a good practice even if your taxable income is below the threshold limit. Your ITR contains details of the income earned through all sources like salary, business, interest etc. and taxes to be paid during the year.
Why Is it Important to Submit ITR for a Home Loan?
ITR is an essential part of income proof that you need to submit with the rest of the documents for a home loan application. Through income proof, the lender can determine your creditworthiness and income. An ITR serves the following purposes for the lender –
It helps them understand your financial stability
Typically, you need to submit the ITR of the last three years. Through the income tax returns, the lenders can find out your annual income. They need to ensure that you have a steady flow of income so that you are able to pay the instalments without any default. Moreover, you need to be employed for at least three years to be eligible for a home loan. The last 3-year ITR shows the lender that you have a stable job and receive a steady income every year.
It speaks about your repayment credibility
Filing your ITR speaks volumes about your credibility and responsive nature. It shows that you are abiding by the rules and fulfilling your responsibility. It also indicates that you would be diligent in your Home Loan EMI payments. When the lenders know about your income, it is usually easier for them to determine your creditworthiness and decide if they want to lend you a loan.
A home loan is an easy way to finance your dream home. Therefore, you should submit all the relevant documents accurately, especially your ITR. There are high chances that the lender would reject your loan application if you do not submit your ITR while availing a home loan. Make sure to submit accurate information in order to lower your tax liability by claiming deduction up to a certain amount. Penalty ischarged for late Income Tax Return filing, hence, file your tax returns before the financial years ends.