Income Tax: Importance of ITR for availing Business Loan

A business loan may be a wise choice for someone looking to invest in or launch a new venture. This can assist you in obtaining much-needed business funding and help you achieve your goals and objectives. A business loan does, however, come with a number of requirements. Your ITR (Income Tax Return) form is one of them.

We will be understanding the importance of an ITR form to avail a business loan. Let’s start by clarifying what an Income Tax Return (ITR) form is.

An ITR is a document that details an individual’s income and taxes that must be paid throughout the year. This is turned in to India’s Income Tax Department.

Read also: Tax benefits on business loan in India

Why do you need an ITR form for a Business Loan?

Shows that you are financially responsible:

The government has mandated that you file your income tax return by the deadline. Those making a certain amount of money are required to do this. Completing the tax return is an indication of your good citizenship and shows that you feel obligated to your country.

ITR is one of the important documents:

A balance sheet and a profit and loss account are among the many documents needed for a business loan. In addition to these, the completed ITR form for the previous three years must be submitted. These are a component of compliance and support the strength of your loan application.

Read Also: Cash Transaction Limit in India – cash payment and cash receipt

Helps the lender understand your business:

Your business income, interest from savings and fixed deposits, and any additional revenue from other sources are all listed on an ITR form. Any interest you may have paid on a loan is also included. In general, it provides an overview of your financial situation and business intelligence. This will make it easier for your lender to evaluate your financial situation and determine how much business financing you qualify for.

To calculate your income:

Your lender can determine your net income with the use of an ITR form. This is completed taking into account every component of an ITR form. When you apply for a business loan, the lender may base their decision on this income. They may also decide not to grant you a loan amount altogether.

Even though we’ve highlighted the importance of the ITR for a business loan, many people still do not possess an ITR form. Does this imply that obtaining an ITR is a requirement for obtaining a business loan? Thankfully, that is untrue. A business loan can be obtained without an ITR.

Read also: Over 50% of individuals got Tax refunds in a month: Survey

Types of Business Loans and their ITR Requirements

The ITR requirements may vary depending on the type of business loan you apply for:

Secured Business Loans

Because secured loans are backed by collateral, they often have slightly lower ITR requirements. Lender risk is decreased as a result, and ITR requirements are loosened.

Unsecured Business Loans

As unsecured loans aren’t backed by collateral, the risk for lenders is higher. Thus, the ITR requirements are typically stricter.

Read also: Loans: Income Tax on loan -check all tax benefits available

How To Get A Business Loan Without An ITR Form?

1. Pledge Collateral

Having an asset to put up as collateral may make it simpler for you to get a business loan. In this manner, the application process and the likelihood of loan approval are streamlined.

2. Benefit From Various Government Schemes

For those looking for business loans without an ITR, there are numerous government programs available. For the most part, these loans don’t need collateral. The National Small Industries Corporation (NSIC) Subsidy and the Mudra Loan Scheme are two government initiatives that provide loans without an ITR.

3. Improve Your CIBIL Score

Even if you have an ITR, the lender will still review your CIBIL score. Making sure your credit score is higher than 750 even without an ITR form could help you get a business loan.

4. Apply For A Business Loan With Co-Applicants

Professional family members of the borrower may apply as co-applicants provided they can provide proof of their income. You will therefore stand a better chance of having your loan application accepted.

Read Also: 5 Home Loan tax benefits u/s 24, 80C, 80EE, 80EEA of Income Tax Act for year 2023

CA Certified ITR

The attestation of a Chartered Accountant on a certificate or any document is of immense value since it usually signifies that the CA, in his professional opinion, has ensured that there is no misrepresentation by the entity issuing/submitting such a document. A prime example of this being an audit report issued by the auditor in respect of the financial statements of an entity stating the financial statements reflect a true and fair view of the state of affairs of the entity.

It is because of this attestation or signature made by the Chartered Accountant that the investors and other stakeholders can rely on the performance of an entity. One of important Certification is CA certified Income Tax Return (ITR).

CA certified ITR is mainly used in bank for the purpose of loan. Banks at the time of any type of loan ask for certified ITR. Bank are only interested in verifying the applicant’s repayment capacity, for this they accept CA certified ITR due to the following reason:

1. Credibility: A CA certified ITR carries more weight and credibility than a self-filed ITR. It gives the tax authorities the confidence that the return has been filed correctly and with due diligence.

Read Also: Loans: Income Tax on loan -check all tax benefits available

2. Proof of Income: A CA certified ITR serves as proof of income for various purposes such as obtaining loans, visas, and other financial transactions. It provides a record of your income and tax payments, which can be used as evidence of your financial status.

Some lenders may also ask the borrower to produce their net worth alongside tax documents, which are formed with the expertise of a chartered accountant. Income Tax Return filing could help one with any kind of loan, be it Vehicle (car) Loans, Personal Loans, business loan and the House Loans.

CA certified ITR cannot be True copy

In a set of FAQs about issuing the UDIN, the ICAI said that “Chartered Accountants ( CA ) are not authorised to certify Income Tax Return (ITR) as True copy. However, they can make an opinion/ certificate/ report about ITR based on its source, location and authenticity of data from which ITR is being prepared and UDIN is required while doing so.”

Unique Document Identification Number (UDIN) is a significant step forward in bringing openness to the sector and combating malpractice. UDIN is a number that is assigned to any document in order for legal authorities to verify its legitimacy. The UDIN concept is being implemented with the purpose of reducing fraud in the country.

The banks, regulatory bodies, and third-party stakeholders can simply track the UDIN issued by a Chartered Accountant to any document proving the veracity of the information. Authorities can trace the UDIN to check the CA’s credentials and ensure that the papers are only certified by them.

Read Also: MSME Loan- Eligibility criteria, Process, Interest Procedure, Last date


Understanding the ITR requirements for a business loan is crucial for a successful application. While the requirements may vary depending on the type of loan, lenders will generally assess your ITR alongside your credit history and financial statements. It’s important to do your research and consider seeking advice from a financial advisor or a lending professional.

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