If a person is carrying a home loan in some other country (outside US) for some property in that country is there any tax relief/deduction from IRS for such person ?

IntlTax

Mortgage interest on a second home is deductible on schedule A as an itemized deduction, even if the second home is located outside the U.S. The interest should be reported on Schedule A on the line that says mortgage interest not reported on Form 1098. However, if you reside in the U.S. and the lender is a foreign bank, then you are required to withhold 30% tax on the interest portion of the payments, unless a lower treaty rate applies. If you want to rely on the treaty, you need to obtain a Form W-8BEN from the foreign bank where the bank certifies that it qualifies for treaty benefits. In either case, you will need to also file Form 1042 and 1042-S reporting that you made interest payments to foreign persons.

MukatA

I really doubt that you can withhold 30% tax for the interest paid to a foreign bank. For the bank it is not a U.S. source income.
Bank will not issue W-8BEN.
Foreign bank in a foreign country has nothing to do with the U.S. taxes.

IntlTax

Interest income is sourced based on the residence of the obligor. Code § 861(a)(1) ("The following items . . . shall be treated as income from sources within the United States . . . . Interest from . . . obligations of noncorporate residents . . . "). This is not a purely theoretical matter. In Housden v. Commissioner, 63 TCM 2063 (1992), a U.S. resident had existing loans from a Canadian bank prior to moving to the U.S. After he moved to the U.S., he continued to make payments on the loans from the Canadian bank. The Tax Court held that he was liable for the withholding tax.

While I agree that it is likely impossible to obtain a W-8 from a foreign bank and that the bank would not accept anything less than the full amount of the payment, I like to make individuals in this circumstance aware of their risk/obligation.