Why Filing an ITR is Important to Avail the Home Loan?

HOUSING | Know More 11 January 2022

In the 90s and early 2000s, buying a house was considered a necessity. Given the relationship between the income rates people were earning on average and the home prices being offered to them at the time, it was not uncommon (quite the contrary) for an individual to be able to purchase a house for themselves using a year or two years worth of salary. This meant that buying a house and starting a family was a fairly simple affair.

Why Filing an ITR is Important to Avail the Home Loan?

With property rates skyrocketing the last two decades, however, it has become a distant dream for many to be able to purchase a house for themselves right out the gates, with many spending their entire careers pooling together and saving enough funds to meet the price of a simple one or two BHK (sometimes smaller) in a tier-one metro city, with tier two and three locales quickly catching up. As a result, individuals began looking for the best home loans, as it was the only way they could own a house of their own.

However, given the disparity between income rates and property prices, people oftentimes require decades to repay the loan, and banks need to ensure that they are confident you can repay the loan, resulting in a number of terms and documents required for a home loan. One such condition is that you have to file your income tax returns (ITR) in order to get a home loan and any subsequent home loan tax benefit. But why?

Let’s find out!

What does IT refer to?

ITR or Income Tax Returns is essentially a form that you have to fill that depicts the amount you have earned in that year, the subsequent tax bracket you fall into, and therefore the amount of income tax that you have to pay. Generally, 7 such Income Tax forms and bands are provided by the Income Tax Department.

ITR Band Conditions
ITR 1 For those earning 50 lakhs or less
ITR 2 For those with income other than from “Profits and Gains from Business or Profession” including income from capital gains, foreign assets/income and income from other sources like legal gambling.
ITR 3 For those earning 50 lakhs or more including capital gains, rent, company profits etc.
ITR 4 For those earning ITR 1 + 50 lakhs additional income.
ITR 5 For LLPs, associations, firms etc
ITR 6 For companies not claiming exemptions under Section 11 of the IT act
ITR 7 For entities that fall under Section 139 (4A), (4B), (4C), (4D).

Why do you have to file your ITR to get a home loan?

Put simply, your ITR documents provide proof of the income that you are earning which allows banks to assess their risk and set interest rates accordingly. Let's dive deeper for a better understanding so that you can complete the procedure without a hitch, and get the best home loans and the additional home loan tax benefit as well! Some details include

  1. Your ITR should show that you have a stable income. This way banks can rest assured that they have the capacity to repay the loan, allowing for potentially better interest rates.
  2. Income statements for the last three years are required as part of the ITR.
  3. If your ITR has not been filed, not only could you miss out on the best home loans, but could also invite legal action from authorities.
  4. You will often be requested to provide a ‘net worth statement’ along with your ITR, and if you own a business, audited financials will be required as well.


Filing your ITR is the first and foremost step in ensuring you are eligible for a home loan. Not only is it mandatory by law, but it also allows lenders to assess your repayment capacity. Providing all the right ITR documents will communicate to the lender that you are confident in your ability to repay. If you wish to apply for a home loan, you can choose from the multitude of options available on the Piramal Finance website. Here’s how you can apply.

[Also Read: A Complete Guide to Real Estate Financing ]

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