When we avail a bank loan, whether for business, buying or repairing a home, purchasing a vehicle, marriage, education (for ourselves or for children), or for other reasons, one of the mandated documents is copies of income tax returns for the last three years or so. According to reports, the number of tax returns filed in the financial year (FY) 2023-24, for all assessment years up to October 31 2023, was 7.85 crore. This is considered an all-time high compared to the 7.78 crore returns filed in FY 2022-23. In the assessment year (2024-25), 8.22 crore returns have been filed till Feb 14, 2024.
Yet, these figures are minuscule compared to India’s population (140 crore) and the crores of employed (self or otherwise) people. Reportedly, about 5% of Indians pay tax, thanks to deductions at the source by the employees. When this is the case, how do those who do not pay income tax, either for themselves or for their businesses (small and medium traders, vendors, shop owners, etc.), manage to obtain bank loans in the absence of tax returns from previous years?
