Q Why do banks needs my Income Tax Return before giving me Loan ?
They check your earnings potential to find out whther you have enough earnings to repay the loan that you intend to borrow.
It helps them know them about the stability of the income earned by you over the years and helps them gauge the future earning capabilities. The banks would prefer to give loan to someone who is capable of repaying it in the future.
Q For How many years Income Tax Return are generally asked by banks before providing Loan ?
Generally bank takes last Three years income tax return for determining your income eligibility against the amount of loan you applied for.
Q How much loan does the Bank provides based on my Income Tax Return ?
e.g. Your monthly in hand pay is Rs. 50,000 then the EMI cannot be Rs. 45,000 as you’ll need more than Rs. 5,000 for your expenses.
Normal ratio which bank consider for payment of your EMI is 60:40.
60 percent of your in hand income for the purpose of payment of EMI
40 percent is for your household expenses.
Q What are the various factors which banks consider before giving me Loan ?
If your are a salaried person – they will check your in hand salary, your period of working in current company, your current loans, if any. To determine whether your in hand salary is enough to pay your current and future loans.
In case of self employed : Period from which you are into this business, your Three years Profit and Loss Account and Balance Sheets, your cash flows from business, banking transaction of last 6 months.
Banks Also Check your CIBIL rating