Benefits of submitting an ITR for availing a Home loan.

By Abhay Shah, Realty Quarter

The home loan lender requests you to send your income tax documents, such as copies of your income tax returns (ITR), in relation to your basic KYC papers (such as your proof of address and identity) and estate records (such as the chain of documents and land title deeds).

TDS for a salaried individual (Form No. 16).

Although it is compulsory for each person whose gross salary exceeds the basic exemption limit to submit his income tax return under Indian income tax act, this is not done by all salaried individuals. Lenders who are only interested in verifying the repayment ability of the applicant recognize Form No 16 as evidence of their income and do not insist on their income tax return.

Form No 16 has salary information paid and tax deducted from it. The lender understands your employer from Form No 16. When Form No. 16 is given by a registered business or a government agency or any reputable organization, the loan provider leads with confidence that his salary and earnings are genuine. Form No 16 also contains tax deducted at source (TDS) information. The lender can take comfort in the fact that salary payments are real based on the frequency of the tax deduction, which is apparent in Form 16. Your gross emoluments are the amount of TDS and other deductions to the provident fund’s contribution etc.

If the tax deducted at source (TDS) is not regular or the salary is not paid regularly, doubts about the real nature of salary can be raised unless specific savings, such as equity investments, mutual funds, bank deposits etc., demonstrate income. Form No. 16 also contains details on the items against which you claimed tax benefits under Section 80C. If there is adequate income, but investments under Section 80C are not made in full, the creditor may conclude that the income tax return does not reflect your liability or that the lifestyle is extraordinary. In turn, this could affect your eligibility for your home loan. It also provides information on the employer’s allowance for you with regard to any home loans, which will help the lender to determine your general eligibility.

ITR for a Non- Salaried individual.

The lender shall insist you to submit your income tax return in case you are a non-salaried individual. A person has to submit ITR along with supporting documents, like computation of total income, profit and loss account and balance sheet of your business. These documents assist the lender to know your business, the nature and amount of current loan, the company’s profitability and the quantity of its own investment. These papers will also assist the lender to know the way in which you are saving.

The lender will choose the capital to grant your home loan based on the nature of your company or profession. Some foreign banks provide home loan for chartered accountants and doctors, as many of your gross receipts rather than as net profit shown in the profit and loss account. It usually determines your eligibility of a loan for entrepreneurs by a multiple of your net profit. The sum of depreciation stated can be discovered in the income tax records that are added to your income to determine your eligibility for the loan.

Your odds of receiving a loan are even influenced by the punctuality at which you submit your tax return. If the ITR is submitted for the first time, the lender may consider its submission to be filed only in order to apply at home. For instance, when one ITR is filed in March, and the other one is filed in April / May, the lender may have some doubt that the ITRs were simply filed to get a home loan.