An individual can avail deduction on the principal loan repayment u/s 80 C (Max Limit Rs. 1 lakh) subject to fulfilment of prescribed conditions.
Let us consider an example:
Your taxable income is 5,50,000. Principal Repayment for the same year: 1,20,000 and interest payable is 1,70,000.
Total deduction allowed is 2,50,000 (Rs. 1,50,000 towards interest paid on housing loan and Rs.100,000 on principal repayment)
Total Taxable income is Rs. 300,000 (Rs. 550,000 – Rs. 250,000)