How your income is assessed
Salaried income is read off a slip. Self-employed income is derived, usually from a combination of:
- Income tax returns and the computation of income, over two to three years
- Profit figures from audited or CA-certified financials, with depreciation and other non-cash items often added back
- GST filings and turnover, where the business is registered
- Average banking balances and the consistency of credits
What lenders look for beyond income
- Business vintage: how long the business has been running and filing
- Stability of the sector and of your customer base
- Clean banking conduct: no cheque returns, no sustained overdrawn balances
- Existing obligations across you and the business entity
Common friction points
- Income shown in returns is lower than actual earnings, which caps the assessed eligibility
- A recent change in business constitution, say proprietorship to private limited, resets the vintage a lender sees
- Cash-heavy revenue that does not appear in the bank statement cannot be counted
- Mismatched figures between returns, GST and bank statements invite questions
Preparing before you apply
- File returns on time; a delayed filing is a visible gap in the file
- Route business receipts through the bank so income is evidenced
- Keep the personal and business accounts distinct
- Close or regularise small overdue obligations before applying
Frequently asked questions
How many years of ITR do self-employed applicants need?
Two to three years is the common ask, so the lender can see a trend rather than a single good year. Requirements differ by lender and product.
Does a lower declared income reduce how much I can borrow?
Yes. Eligibility is calculated on assessed income from your filings and banking, not on earnings that are not evidenced.
Can a new business get funding?
It is harder without vintage and filings. Some applicants use a secured route, such as a loan against property, where the asset supports the exposure.
Related
Business Loan Documents required for a loan Loan Against Property