ITR Filing for Home Loan: Why It’s Important & Required Documents

Purchasing a home is a major milestone, and most individuals rely on a home loan to make this dream a reality. Understanding ITR filing for home loan is crucial, as it directly impacts your eligibility for tax benefits under the Income Tax Act. Filing your ITR for home loan not only demonstrates your income and repayment capacity to lenders but also allows you to claim deductions on principal repayment, interest paid, and other eligible components under sections 80C and 24(b). Ensuring all home loan documents for ITR filing are accurate and submitted on time helps you maximise tax exemptions while maintaining financial compliance.

Why Is ITR Required for a Home Loan?

When applying for a home loan, lenders want assurance that you can repay the borrowed amount on time. One of the key documents they look for is your Income Tax Return (ITR).

Submitting ITR for a home loan helps banks and financial institutions evaluate your income stability, repayment capacity, and financial discipline. Since ITR reflects your annual income, tax compliance, and earning consistency, it acts as a reliable proof of financial credibility.

Key Reasons Why Lenders Require ITR for Home Loan Approval

• Proof of Income Stability – ITR provides a detailed record of your yearly income, showing lenders that you have a stable source of earnings.
• Assessment of Repayment Capacity – Lenders use ITR to analyze whether your income is sufficient to handle EMIs along with existing financial obligations.
• Verification of Financial Authenticity – ITR ensures your income sources are legitimate and officially recorded, which reduces risk for lenders.
• Stronger Loan Eligibility – Having ITRs for the last 2–3 years enhances your chances of getting a higher loan amount at better terms.
• Mandatory for Self-Employed Individuals - For self-employed borrowers, freelancers, or business owners, filing ITR for home loan is especially important. Unlike salaried individuals, they do not have regular salary slips or Form 16 to prove their income. In such cases, the Income Tax Return (ITR) becomes the most critical document for lenders to assess repayment capacity and verify financial stability. Submitting complete home loan documents for ITR filing ensures that self-employed applicants can avail of home loans smoothly and claim eligible tax benefits without complications.

Tax Benefits on ITR Filing for Home Loan

Filing your ITR for home loan is crucial to claim tax deductions under various sections of the Income Tax Act. These deductions can significantly reduce your taxable income, ensuring substantial savings while staying compliant. Key sections include:

Section 24(b) – Allows a deduction of up to INR 2 lakh on the interest paid for a self-occupied property. Filing your ITR with accurate home loan interest details ensures that this deduction can be claimed without issues.

Section 80C – Permits a deduction of up to INR 1.5 lakh on the principal repayment of your home loan. Including your principal payment details in your ITR is essential to avail this benefit.

Section 80EE – Provides an additional deduction of up to INR 50,000 on home loan interest, applicable to first-time homebuyers, subject to eligibility criteria. Filing your ITR with this information allows you to claim this extra benefit.

Section 80EEA – Offers an additional deduction of up to INR 1.5 lakh on interest paid for first-time homebuyers for affordable housing, provided the loan meets specific conditions. Proper ITR filing is required to validate and claim this deduction.

By submitting complete and accurate home loan documents for ITR filing, including principal and interest statements, borrowers can maximise tax savings across these sections while maintaining a clear financial record for lenders.

Steps to File ITR for Home Loan Benefits

Proper ITR filing is crucial to claim the tax benefits associated with your home loan. Follow these steps:

Step – 1: Gather Necessary Documents:

Before you file your ITR for a home loan, it is important to have all the home loan documents for ITR filing ready. These documents ensure smooth processing of your tax deductions and help lenders verify your income and repayment capacity accurately.

Home Loan Documents for ITR Filing

To ensure smooth processing of your ITR for home loan and to claim all eligible tax benefits, the following documents are required:

• Form 16 (for salaried individuals) – to verify salary income.
• Interest certificate from your lender – showing the interest paid on your home loan.
• Loan repayment statement – detailing principal and interest components.
• Property details – including address, registration, and ownership information.
• Certificate of purchase or construction – to confirm acquisition or completion of the property.
• Municipal taxes receipt – proof of payment of property taxes, if applicable.
• PAN card – for identity and tax verification.
• Bank statements – reflecting home loan EMI payments.

Step – 2: Submit Documents to Employer:

• Salaried employees should provide the necessary documents to their employer to adjust TDS (Tax Deducted at Source) accordingly.

Step – 3: Calculate Deductions:

• Determine the eligible deductions under Sections 80C, 24(b), and 80EE.

Step – 4: File Your ITR:

• Visit the official Income Tax Department website.
• Choose the appropriate ITR form (e.g., ITR-1 for salaried individuals).
• Fill in the required details, including income, deductions, and tax paid.
• Review and submit the form.

Tips to Maximise Tax Benefits on Your Home Loan through ITR Filing

To fully leverage the tax benefits on your home loan:

• Stay Informed: Keep abreast of the latest tax laws and amendments related to home loans.
• Maintain Records: Keep all loan-related documents organised for easy reference during ITR filing.
• Consult Professionals: Seek advice from tax consultants to ensure you're maximising your deductions.

Can You Get a Home Loan Without ITR?

Yes, it is possible to get a home loan without ITR, though it may be more challenging. Lenders typically rely on ITR as proof of stable income and repayment capacity, but there are exceptions. If you do not have income tax returns, you can strengthen your application with alternative documentation, a strong financial profile, and the right strategy.

1. Utilize Alternative Documentation

If you cannot provide ITR, other financial records can support your repayment ability:

• Bank Statements – Regular deposits and healthy balances can indicate steady income.
• Salary Slips and Employment Proof – For salaried applicants, pay slips and appointment letters show income stability.
• Business Financials (for self-employed) – Balance sheets, profit and loss accounts, or GST returns can substitute for ITR.
• Rental Income or Other Earnings – Rent agreements or income from investments can be shown as valid sources.
• Property Valuation and Collateral – The value of the property you mortgage can strengthen the lender’s confidence.

2. Strong Financial Profile

Even without ITR, a solid financial background improves approval chances:

• Good Credit Score – A high CIBIL score reflects repayment discipline.
• High Savings – Strong savings and investments highlight financial stability.
• Low Debt-to-Income Ratio – Lower existing debt makes repayment easier and reduces risk for the lender.

3. Strategies to Consider

Applicants can adopt additional strategies to improve eligibility:

• Applying with a Co-Applicant or Guarantor – A co-borrower with ITR improves creditworthiness.
• Lower Loan-to-Value (LTV) Ratio – Opting for a smaller loan against the property value increases approval chances.
• Specific Loan Programs – Some lenders and NBFCs offer customized schemes for individuals without ITR.

4. Approach

Your interaction with the lender also matters:

• Choose the Right Lender – Some private banks, NBFCs, and housing finance companies are more flexible than others.
• Be Transparent – Sharing complete and honest financial details builds lender trust.

Also Read: Home Loan: All You Need to Know – Godrej Capital

The Bottom Line

Understanding the nuances of ITR filing for home loans is essential for every borrower. By diligently filing your ITR and claiming the available deductions, you can significantly reduce your tax liability, making your journey to homeownership more affordable.

Embark on your homeownership journey today. Apply for a Loan and take the first step towards owning your dream home.

Moreover, to accurately calculate your EMIs using an Home loan EMI calculator. This way you save time and effort on calculations while also being able to plan your finances well!

FAQs

Q.1. Is ITR filing mandatory for a home loan?

A. Yes, you are required to submit ITR for the last 3 years for a home loan. This helps the lender ascertain whether you have a stable source of income and can pay the EMIs timely.

Q.2. Which ITR form is required for home loan?

A. You must file Form ITR-1 Sahaj, which applies if you are a salaried professional repaying a home loan for a self-occupied property. You should also be aware of the home loan tax benefits. These include deductions of up to INR 1.5 lakh on principal repayment, stamp duty and registration charges.

Q.3. How many years of ITR is required for a home loan?

A. Lenders usually require ITRs for the past 2-3 years when processing a home loan application. This includes personal ITRs and business ITRs if you're self-employed. Form 16 and other financial documents may also be needed.

Q.4. What happens if I don't file my ITR?

A. Failing to file your ITR can lead to penalties, loss of tax benefits, difficulty in loan approvals, and legal consequences. In extreme cases, failing to file your return can lead to imprisonment for up to 7 years for willful defaulters.

Q.5. Can I apply for a loan without ITR filing?

A. Yes, lenders like NBFCs, fintech companies, and government schemes offer business loans without requiring ITR.

Q.6. What documents are required along with ITR for home loan application?

A. Key documents include Form 16 (for salaried individuals), interest certificate, loan repayment statement, property details, certificate of purchase or construction, municipal tax receipts, PAN card, and bank statements. These ensure accurate ITR filing for home loan and allow lenders to verify income and claim tax deductions.

Q.7. Can I claim tax benefits on home loans if I am self-employed?

A. Yes, self-employed borrowers can claim deductions under Sections 80C, 24(b), 80EE, and 80EEA. ITR for home loan acts as the primary proof of income since salary slips or Form 16 are unavailable. Accurate filing and submission of all home loan documents for ITR filing are essential.

Q.8. How to claim home loan interest under Section 24(b) in ITR filing?

A. To claim deductions under Section 24(b), report the interest paid on a self-occupied or rented property in your ITR. Attach your interest certificate from the lender and loan repayment details. Proper documentation ensures the claimed amount is eligible for deduction up to INR 2 lakh per financial year.

Q.9. Is ITR filing needed for home loan balance transfer?

A. Yes, lenders typically require updated ITR for home loan when processing balance transfers. It verifies income stability and repayment capacity. Submitting recent ITRs along with loan statements and property documents ensures smooth approval and helps in claiming eligible tax benefits even after transferring your home loan.

Q.10. What if my ITR shows losses, will that affect my home loan approval?

A. If your ITR shows losses, lenders may scrutinize your repayment capacity more closely. For self-employed individuals, losses are common, but consistent ITR filing and proper home loan documents for ITR filing can demonstrate financial credibility and facilitate loan approval without affecting eligibility for home loan tax deductions.

Q.11. Can NRIs file ITR for home loan tax benefits?

A. Yes, NRIs with a home loan in India can file ITR to claim tax benefits on principal and interest repayments. Filing an ITR for home loan is mandatory to avail deductions under Sections 80C and 24(b), provided the property is in India and the loan is taken from an Indian bank or financial institution.

Disclaimer:

The content presented on this page, including images and factual information, is intended solely as a summary derived from publicly available sources. GHFL/GFL (“Company”) does not claim ownership of such information, nor does it represent that the Companies have exclusive knowledge of the same. While efforts are made to ensure accuracy, there may be inadvertent errors, omissions, or delays in updating the content. Users are strongly encouraged to independently verify all information and seek expert advice where necessary. Any decisions made based on this content are solely at the discretion and responsibility of the user. Godrej Capital and its affiliates assume no responsibility for any loss or damage that may result from the use of or reliance on the information provided herein.