Filing an Income Tax Return (ITR) is a crucial financial responsibility for individuals, especially for those planning to apply for a home loan. Banks and financial institutions use ITR documents to assess an applicant's financial stability, income consistency, and repayment capacity. In 2025, with stricter financial regulations, lenders require applicants to submit ITRs for at least two to three financial years before approving a home loan application. Understanding the importance of ITR and knowing how to file it correctly can increase your home loan eligibility and secure better interest rates. This article provides an in-depth look at why ITR is essential for home loans and a step-by-step guide on how to file your ITR in 2025.

When applying for a home loan, financial institutions thoroughly evaluate your income records to determine if you can repay the loan. ITR plays a critical role in this evaluation. Here are some reasons why:

A. Proof of Income Stability

Lenders require stable and consistent income proof to approve home loans. ITRs provide a detailed record of your annual income, tax payments, and deductions, making them a crucial document for salaried and self-employed individuals.

B. Establishes Creditworthiness

An ITR reflects financial discipline and proves that the applicant has been consistently reporting income to the government. A well-maintained tax record increases trust in the borrower's ability to repay loans.

C. Essential for Self-Employed and Business Owners

For salaried individuals, salary slips and Form 16 are primary proof of income. However, for self-employed professionals and business owners, an ITR is the only reliable document that proves income. Without an ITR, getting a home loan becomes challenging.

D. Helps in Loan Amount Calculation

Lenders use ITRs to determine the maximum loan amount an applicant qualifies for. Higher taxable income in ITR records increases the chances of securing a higher loan amount at competitive interest rates.

E. Required for High-Value Loans

For home loans exceeding Rs 25 lakh, banks typically request ITRs from the past 2-3 years. This is mandatory for applicants who:

• Are self-employed or freelancers
• Own multiple income sources
• Have irregular income patterns

Most banks require at least two to three years of ITR records when processing home loan applications. Here's a breakdown of different cases:

• Salaried Individuals: Minimum two years of ITR preferred.
• Self-Employed Professionals: At least three years of ITR mandatory.
• Freelancers & Business Owners: Strong ITR records for the past three years required.
• Non-Resident Indians (NRIs): Some banks may require additional financial documents apart from ITR.

Without ITR, banks may reject the home loan application or offer a higher interest rate due to an unverified income history.

With digital advancements and updated regulations, filing ITR in 2025 has become more straightforward and efficient. Here is a step-by-step guide to help you file your ITR correctly.

Step 1: Access the e-Filing Portal

Go to the official Income Tax Department e-filing portal: https://www.incometax.gov.in/iec/foportal/

Step 2: Log In or Register

• New users: Register using your Permanent Account Number (PAN).
• Existing users: Log in with your credentials.

Step 3: Select the ITR Form and Assessment Year

• Choose the correct assessment year:
• For income earned in Financial Year 2024-25, select Assessment Year 2025-26.
• Select the correct ITR form:
• ITR-1 (Sahaj): Salaried individuals with income up to Rs 50 lakh.
• ITR-2: Individuals with income from capital gains, multiple properties, or foreign income.
• ITR-3: Business owners and professionals.

Step 4: Fill in Your Income Details

• Provide information on salary income, business income, capital gains, and rental income.
• Upload Form 16 if salaried, or profit and loss statement if self-employed.

Step 5: Claim Deductions Under Tax-Saving Sections

• Section 80C: Deduction up to Rs 1.5 lakh on home loan principal repayment.
• Section 24(b): Deduction up to Rs 2 lakh on home loan interest.
• Section 80EE & 80EEA: Additional deductions for first-time homebuyers.

Step 6: Verify Tax Computation and Pay Balance Tax (if applicable)

• Check if there are any additional tax dues before submission.
• Pay the required amount through Net Banking, Debit Card, or UPI.

Step 7: Submit and Verify Your ITR

After filing, you need to e-verify your return within 30 days using:

• Aadhaar OTP
• Net Banking
• Electronic Verification Code (EVC)

1. Incorrect Income Details: Ensure that all sources of income are correctly mentioned.
2. Not Claiming Home Loan Deductions: Use Sections 80C, 24(b), and 80EEA to maximize tax benefits.
3. Mismatch with Bank Statements: Ensure that the declared income matches bank records.
4. Missing the Deadline: File your ITR before July 31, 2025, to avoid penalties.
5. Not Verifying the ITR: Your ITR is invalid if not verified within 30 days.

• Higher Loan Eligibility: A strong ITR history improves loan approval chances.
• Lower Interest Rates: Banks offer lower interest rates to applicants with consistent tax records.
• Easier Loan Processing: Faster approval due to verified income documents.
• Tax Benefits: Claim deductions on home loan principal and interest repayment.

Filing an Income Tax Return (ITR) is not just a legal obligation but also a crucial document for securing a home loan in 2025. It helps lenders assess your financial stability, improves your chances of loan approval, and allows you to claim tax benefits on home loans. With an easy online filing process, applicants can file their ITR quickly through the Income Tax e-filing portal. Ensuring accurate financial details, claiming deductions, and filing before the deadline will maximize tax savings and improve home loan eligibility.