Both principal as well as interest of home loans attract tax benefits.
Interest paid on the home loan:
Deduction up to Rs. 2,00,000 towards the total interest payable on the home loan towards purchase / construction of house property can be claimed while computing the income from house property. The interest payable for the pre-acquisition or pre-construction period would be deductible in five equal annual instalments commencing from the year in which the house has been acquired or constructed.
Please remember that in case of self-occupied property, this deduction is allowed only for one such self - occupied property. The interest towards home loan taken for purchase, construction, repairs, renewal or reconstruction of house property is eligible for deduction under separate section of income tax act.
Principal repayment of the home loan:
The principal repayment up to Rs. 150,000 on your home loan will be allowed as a deduction from the gross total income subject to fulfilment of certain conditions