Under the Income Tax Act, taxpayers can claim a deduction for the principal and interest paid on a home loan. The maximum deduction allowed for the principal repayment is up to Rs. 1.5 lakhs per financial year under Section 80C, while the maximum deduction for the interest paid is up to Rs. 2 lakhs per financial year for a self-occupied property under Section 24(b). If the property is rented out, the entire amount of interest paid can be claimed as a deduction without any limit. It is important to note that the maximum deduction allowed under Section 80C is inclusive of other eligible investments and expenses, such as life insurance premiums, tuition fees, etc.