I t return

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Querist : Anonymous

Querist : Anonymous (Querist)

13 January 2014 1 OF MY CLIENT WANTS TO GET HOUSING LOAN OF RS. 7 LAC..SO HOW MUCH TAX SHOULD HE PAY FOR LAST F.Y..??

THANKS IN ADV

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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13 January 2014 Loan will be decided on your income not on income tax

Querist : Anonymous

Querist : Anonymous (Querist)

14 January 2014 SO HOW MUCH PROFIT SHOULD I SHOWN SIR TO GET LOAN OF RS.7 LAC..PLS HELP

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
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28 July 2024 To determine how much income your client should show on their income tax return (ITR) to qualify for a housing loan of ₹7 lakh, and to estimate the related tax liability, several factors come into play. Lenders typically assess a borrower’s eligibility based on income, existing liabilities, and creditworthiness. Here’s a general approach to estimate the income and tax implications:

### **1. Understanding Housing Loan Eligibility**

Banks and financial institutions use various criteria to determine loan eligibility, including:

- **Income Level**: Higher income improves loan eligibility. Typically, lenders look at net income after tax and existing obligations.
- **Debt-to-Income Ratio**: Lenders often consider the ratio of monthly debt payments to monthly income. This ratio varies by lender but is commonly around 40-50%.
- **Credit Score**: A good credit score improves eligibility and terms.

### **2. Income Required for a ₹7 Lakh Loan**

To estimate the income required for a ₹7 lakh loan, consider the following:

- **Loan Tenure and Interest Rate**: Monthly EMI (Equated Monthly Installment) is determined by the loan amount, tenure, and interest rate. Assuming a 7% annual interest rate for a 5-year term:

- Using an EMI calculator, a ₹7 lakh loan at 7% interest for 5 years results in an EMI of approximately ₹13,200.
- For a 10-year tenure, the EMI is around ₹8,500.

- **Income Requirement**: To comfortably handle the EMI, the general rule is that the EMI should not exceed 40-50% of the borrower’s net monthly income. Thus:

- For a 5-year term with an EMI of ₹13,200, a monthly income of around ₹30,000 to ₹33,000 may be required.
- For a 10-year term with an EMI of ₹8,500, a monthly income of around ₹20,000 to ₹25,000 may be sufficient.

### **3. Estimating Tax Liability**

Income tax liability depends on the total taxable income and applicable tax slabs. For simplicity, let’s consider a basic calculation:

**For FY 2023-24 (Assessment Year 2024-25)**

- **Tax Slabs for Individuals Below 60 Years** (Old Regime):

- Income up to ₹2.5 lakh: Nil
- Income from ₹2.5 lakh to ₹5 lakh: 5%
- Income from ₹5 lakh to ₹10 lakh: 10%
- Income above ₹10 lakh: 30%

- **Deductions**:
- **Section 24(b)**: Deduction on home loan interest (up to ₹2 lakh per year).
- **Section 80C**: Deductions for principal repayment, etc. (up to ₹1.5 lakh per year).

**Example Calculation:**

Assume the client has an annual income of ₹4.8 lakh (₹40,000 per month):

1. **Tax Calculation Without Deductions**:
- Income up to ₹2.5 lakh: Nil
- Income from ₹2.5 lakh to ₹5 lakh: ₹2.5 lakh * 5% = ₹12,500
- Total Tax: ₹12,500

2. **Tax Calculation With Deductions**:
- Assuming deductions under Section 80C and Section 24(b) are claimed, the taxable income could be reduced.

### **4. Practical Recommendations**

- **Income Shown**: To comfortably get a loan of ₹7 lakh, the client should ideally show an annual income of at least ₹2.4 to ₹4 lakh, depending on the loan tenure and EMI amount. A higher income improves chances and loan terms.
- **Loan Documentation**: Ensure that all income documentation is accurate and reflects the client’s financial status to facilitate loan approval.
- **Consult a Financial Advisor**: For a detailed assessment tailored to your client’s specific situation, consulting a financial advisor or loan specialist is advisable.

This approach provides a general guideline, but actual requirements can vary based on the lender's policies and other financial factors.

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