While availing a home loan, you need to make monthly EMI payments which include the principal amount and the interest payable. The Income Tax Act enables borrowers to get tax benefits on both the principal amount and the interest. When it comes to the interest portion of the EMI that is paid for the year, it can be claimed as a deduction from your total income of up to a maximum of Rs. 2 lakhs under Section 24. But the home loan taken for the purchase or the construction of the house must be completed within 5 years from the end of the financial year in which the loan was taken by you.
Principal part of the EMI is allowed as deduction under Section 80C, where the maximum amount that you can claim is up to Rs. 1.5 lakhs. To claim this deduction, the house should not be sold within 5 years of possession. There is an additional deduction under Section 80EE is allowed to the home buyers for maximum up to Rs. 50,000.