Yes, there are tax benefits of availing a home loan. The principal portion of your home loan EMI is eligible for a deduction under Section 80C of the Income-tax Act, 1961, subject to a maximum limit of Rs 1.50 lakh.
If you are a “first-time home buyer”, you can even claim an additional deduction upto Rs 50,000 under Section 80EE (subject to certain conditions). This additional deduction can be availed after first exhausting the
limit under Section 24(b) for the interest portion.
Section 24(b) of the Income-tax Act, 1961, allows a deduction for the interest component of the home loan EMI. For a self-occupied property, the deduction under Section 24(b) is Rs 2.00 lakh per annum.
And in case the house is let-out on rent, i.e. it is a Let-Out Property (LOP), the actual interest payable is eligible for deduction under Section 24(b), thereby not being subject to any maximum limit.
Do note, if you have taken a loan for the purpose of reconstructing, repairing or renovating the property, the amount of deduction you are eligible for under Section 24(b) will be restricted to Rs 30,000, irrespective whether you
want to stay in it or let it out on rent.