ITR filing for Home Loan

A significant milestone is purchasing a home, which is frequently accomplished with the help of a home loan. It is important for borrowers to understand the nitty-gritty of Income Tax Return (ITR) filing as it pertains to home loans in India since the government in this country encourages people to own homes by offering several tax incentives.

This article delves into the importance of ITR filing for home loans, the associated tax benefits, and how to maximise these advantages.

Also Read: Income Tax Return - New Tax Regime vs. Old Tax Regime

Importance of ITR Filing for Home Loan Applicants

Filing your ITR is not just a statutory obligation but also a critical document when applying for a home loan. Here's why:

• ITRs serve as official proof of your income, helping lenders assess your repayment capacity.
• Regular ITR filing indicates financial discipline, enhancing your credibility with lenders.
• Many financial institutions require ITRs for the past 2-3 years to process home loan applications, especially for self-employed individuals.

Tax Benefits Associated with Home Loans

Home loans come with substantial tax benefits under various sections of the Income Tax Act:

• 80C: Allows a deduction of up to INR 1.5 lakh on the principal repayment of the home loan.
• Section 24(b): Permits a deduction of up to INR 2 lakh on the interest paid for a self-occupied property.
• Section 80EE: Provides an additional deduction of up to INR 50,000 on interest paid, applicable to first-time homebuyers, subject to certain conditions.

These deductions can significantly reduce your taxable income, resulting in substantial tax savings.

For instance, if you are in the 30% tax bracket and claim the maximum deduction under Sections 80C and 24(b), you could save up to INR 1.05 lakh in taxes annually.

Utilising a Home Loan Tax Benefit Calculator

To accurately estimate your potential tax savings, you can use a home loan tax benefit calculator. This online tool helps you determine the exact amount to be paid after all eligible tax deductions.

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:

• Form 16 (for salaried individuals)
• Interest certificate from your lender
• Loan repayment statement
• Property details

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.

Maximising Tax Benefits

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.

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 home loan and take the first step towards owning your dream home.

Moreover, to accurately calculate your EMIs using an 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.

Disclaimer:

The contents of this article are for information purposes only and not a financial advisory. The information is subject to update, revision, and amendment and may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Godrej Capital or its Affiliates to any requirements. Godrej Capital or its Affiliates shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any decisions, financial or otherwise based on the contents and information mentioned. For more information, please visit www.godrejcapital.com.