ITR requirements for personal loans: 1, 2 or 3 years? Know what banks want

Mint

18 hours ago

Indian borrowers applying for a personal loan must typically submit proof of income. Salaried applicants usually provide recent salary slips and Form 16 (annual salary certificate), whereas self-employed borrowers show tax documents.
In practice, salaried customers generally meet banks' criteria with the latest payslips/Form 16, while self-employed applicants are expected to furnish Income Tax Returns (ITRs) for multiple years.
Still, there is no such fixed unanimous rule according to which loan applicants are required to definitely provide a certain number of ITR filings to every bank to be eligible for a particular loan product.
Major lenders on the other hand have clear guidelines and regulations according to the specific loan products availed and the type of applicant that applies i.e., if the individual is self employed or salaried: For example, SBI asks for the latest filed ITR (one year) or Form 16, whereas ICICI, HDFC and Kotak Mahindra Banks generally expect ITRs for the past two financial years when verifying income from applicants.
Banks require income proof to check repayment capacity. For salaried individuals, recent salary certificates and Form 16 usually suffice. SBI's policy explicitly mentions the latest ITR/Form 16 (covering one fiscal year) as mandatory documentation, but waives it if the borrower is in a nil-tax slab.
By contrast, self-employed individuals must document earnings with filed ITRs for stability. In most cases, banks ask for at least two years of ITRs (along with audited accounts or Form 16 where ever applicable) to assess the business income, financial stability and continuity of the loan applicant. Salaried applicants: For all salaried borrowers, recent pay slips or salary slips usually work. ITRs may be required to be submitted but they are optional if your income is tax exempt. Self employed applicants: Banks use ITRs to assess and understand your income history, credit history, credit score, future repayment potential and business health. Most lenders prefer at least two years of filings.
Note: In their own interest, aspirational loan applicants are advised to refer to the official website of their respective lending institution for complete details on the documents required for each loan product.
Bank Salaried applicants Self-employed applicants State Bank of India Latest ITR or Form 16 (Waived for nil-tax slab) Latest ITR or Form 16 (One year) ICICI Bank Salary slips and/or Form 16 ITRs for last 2 financial years HDFC Bank Latest salary slips and Form 16 ITRs for last 2 years Kotak Bank Salary slips for last 3 months ITRs for last 2 financial years Axis Bank Last 3 months' payslips, Form 16 Last 2 years ITR IndusInd Bank Last 3 months' payslips, Form 16 Last 2 years ITR
Note: The table of documents required is illustrative in nature, for the updated terms, conditions and documents required refer to the official website of your respective lender and always check the latest bank rules.
Therefore, while salaried individuals mainly rely on salary certificates, self-employed borrowers should be ready with two years of ITR documents for most top banks. Meeting these requirements helps ensure smooth loan processing.
Applicants are encouraged to maintain accurate tax filings and use digital loan portals responsibly. Borrow responsibly and consider using online tools for quick personal loan applications, but always check each bank's updated document checklist before applying.
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