Banks and financial institution grants home loan against house property as prime security. So the only thing such banks analyze before issuing home loan is the repayment capacity of the applicant.
Repayment capacity depends on the regular income of the applicant which is derived from income, age, credit history and average monthly expenses based on family members.
Banks and financial institutions providing home loan will consider the regular income for home loan eligibility. Regular income is calculated by taking applicant’s average net income for the last three years based on form 16 and IT return submitted.
Form 16 is a certificate that employee receives from employer as a proof of tax deduction for the whole year before 31st may of the following financial year.
Such certificate along with form 12BA will state the amount of salary that employee has received during the financial year and the amount of tax deducted from salary.
This is considered as income proof for calculating your regular income.
However, form 16 only considers your salary income. In addition to salary, you may have some other income which has to be shown to your bank or financial institution to get higher home loan approved.
Such income will be taken into account by banks or financial institutions only when you have disclosed it in your IT return. IT return will add authenticity to the income that is disclosed by the applicant.
Documents confirming your income details are vital. If you do not have form 16 or IT return copy then you can provide your salary slip with a bank statement to which your salary is credited.
In case of a self employed person, IT return is a must. Without IT return, banks and financial institutions will not be able to calculate your average income. It will be an added advantage if in addition to IT return you can provide your audited balance sheet and Profit and Loss account.
Average salary income based on form 16, IT return and investments will indicate how financially stable you are.