Income Tax Documents Required for Home Loans

Owning your dream home is now hassle free and attainable, thanks to easy Housing Finance, commonly known as Home Loans. Nowadays, almost every bank offers you a Home Loan to buy or construct your residential property, provided you have the right documents and the credentials to apply for the mortgage loan.

In this article, we will give you all the details you need to make an informed choice about Taking a Home Loan. Read on!

Why should you apply for a Home Loan?

With the ever-increasing price of real estate, it has become almost impossible to buy a good, decent-sized property on own. If you are making a huge investment in buying a house, you would definitely want to buy one that not only looks nice but is situated in a good locality, surrounded by public convenience facilities and amenities in the neighbourhood.

However, with the burgeoning realty prices, it has become very difficult to buy a property from your savings alone. Home Loans thus act as a ticket to your dream house.

There are several benefits associated with Home Loans:

The tax benefits offered by the government of India are in plenty, and this makes Home Loans very attractive for most people, especially the salaried employees. The government has also introduced these tax deductions to encourage people to buy their own homes. The government provides tax deduction not just on the principal, but also on the interest paid. Hence, you are eligible to claim a deduction on principal repayment for up to Rs 1.5 Lakh u/s 80C of the Income Tax of India Act. While a deduction of up to Rs 2 Lakh can be claimed on the interest paid for repayment under Section 24B of Income Tax of India Act. An additional deduction of Rs 1.5 Lakh is available on Home Loans for affordable units from FY 2019-20.

The only thing you need to keep in mind while claiming these tax benefits is that your property has been completed and you can live in it (or rent it out). You cannot claim deductions for a property that is still under construction and not liveable.

Prepayment charges are negligible. Unlike most other types of loans, the prepayment charges or penalties in Home Loans are either not applicable or negligible in nature. So whenever you have surplus money, you can flow them towards your Home Loan repayment and get debt free according to your financial health.

Home Loans come with decent repayment duration. If you take a Home Loan, the repayment tenure can sometimes be as long as 30 years. Home Loans are the only loans that have such a long tenure. Always use an EMI calculator to understand what should be your ideal loan repayment tenure. The long repayment tenure ensures that you can pay back your loan in an easy way and not be burdened by a huge EMI.

The best thing about Home Loans is that you have an option to transfer your loan to another lender if you find a better deal, say if you are offered a lower interest rate. Also, a balance transfer calculator can tell you how much of an advantage you will have when you transfer the loan amount. Always be aware of the floating rate of the loans and make an informed choice before choosing the next lender.

Now that you know the various Benefits of Taking a Home Loan let us delve into the documents that you need to have to get your Home Loan quickly and without hassles.

However, before we give you the checklist of all the documents, here is the reason why banks are so strict about having the right documentation. Banks have to be extra careful about who they are giving out the loan to. One false move may cost them heavily, and penalties in such cases are hefty. Also, the reputation of the bank will be at stake.

Verifying nationality, age, and other particulars about the person applying for the loan – The bank needs to be extra sure that the amount is going to the right person and is a verified transaction. Faulty loans can create a whole lot of problems for the bank.

Financial documents you furnish will accurately tell the bank what your repayment capability is. In case of a default, they will also be able to trace you back and get their money back.

All the documents you submit will give the bank an idea of your Credit Score and whether you will be able to repay the bank. A good Credit Score means that you are a safe bet. A Credit Score of about 650 is generally considered good enough to give out a Home Loan.

Checklist of all the documents you require to secure a Home Loan

You will need to apply for a Home Loan by visiting the bank or by applying for it online. Now that most of the transactions happen over the internet, seeking a Home Loan online is not a big issue. Whatever way you choose to take the Home Loan, you need to make sure that these documents are handy:

Passport size photographs– This is the first requirement for applying for a Home Loan, and the photographs should be clicked recently (preferably, in the last two months).

Identity proof– Various banks accept different types of identity proofs; however, here are the most common ones: Passport, driving license, Voter ID card, PAN Card, and Aadhar card.

Address proof– This is to ensure that you are a resident of India and staying in the place you have mentioned in the document, so it could be: driving license, rental agreement, electricity bills (up to 3 months old) and in some cases, your passport too. For proof of address, some banks can also consider your gas bills.

Employment letter– This is a special case and this is needed especially when you have been employed for less than a year.

Financial documents– You need three financial documents when you are applying for a Home Loan:

Salary slips from the last three months

A bank statement of six months, signed by your bank

Form 16 for two years

In case of business owners, or entrepreneurs IT Returns for the last two years along with the computation of income tax for past 2 years certified by a Chartered Accountant would be required. You must be able to prove that your business exists.

In case you are non-professionals, you will need to submit IT returns for the last two years along with the computation of income tax for the past 2 years certified by a Chartered Accountant.

Property documents (in case you already have one)– Sales deed, khata and the transfer of ownership proof

Advance processing cheque– You will also need to submit a cancelled cheque to validate your bank account.

Last but not least, a duly filled loan application is vital for your Home Loan.

This is a comprehensive checklist of all the documents you will need in order to secure a Home Loan in a timely and hassle-free manner.

Also Read: Claiming Tax Benefits on Your Home Loan is Easy Now