Promissory note in India: format and rules

What a promissory note is

The maker writes and signs an unconditional promise to pay a set sum.

It is payable to a named person or to that person's order.

Indian law treats it as a negotiable instrument under the Negotiable Instruments Act 1881.

A bank note or a currency note is not a promissory note in this sense.

Lenders use it because it is short, clear and easy to prove.

What the note must say

A promise that depends on a condition stops the document being a promissory note.

Stamp and signature

Promissory notes in India carry stamp duty under the Indian Stamp Act.

Many lenders use a revenue stamp and sign across it. Check the amount that applies to your note.

India's IT Act leaves negotiable instruments out of electronic signature rules.

For that reason the generator prints the note to sign by hand in ink.

Pronote, loan agreement or acknowledgement

Small lenders often use a pronote plus a receipt for every installment.

A note worked out

Rahul Sharma borrows ₹1,00,000 from Anil Verma in Noida. He agrees to repay in 10 months at 10% a year.

Each installment comes to about ₹10,464 on a level payment schedule.

Pick «Monthly installments» above and the note prints one page per payment.

Interest on the note

The note can carry interest if the rate is written on it.

Write the rate per year and say whether it runs on the unpaid balance.

Without a written rate, the note shows the principal only.

Very high rates invite disputes. State-level money-lending rules may also apply.

Repaying and closing the note

1. Agree the schedule and write it on the note.
2. Give a receipt for each installment received.
3. Note each payment on the back of the original or in a ledger.
4. On the last payment, return the original note to the maker.
5. Write «paid in full» with the date on the returned note.

When the borrower stops paying

Start with a polite reminder the day after a missed installment.

If several reminders go unanswered, send a written demand with the balance.

For recovery through the courts, take advice from a lawyer with the original note.

Old notes may be time-barred. Check the dates early.

How lenders remind on WhatsApp

«Namaste Rahul ji. Reminder that installment 4 of 10, ₹10,464, is due on 28 February. Thank you.»

A short message three days before each date keeps most notes on schedule.

Common mistakes

• A conditional promise such as «when my business improves».
• Amount in figures that differs from the words.
• No stamp where one is needed.
• No date or place.
• No receipt for part payments.

Demand promissory note

A demand promissory note, often called a DPN, has no fixed due date.

The maker promises to pay «on demand», whenever the lender asks.

«On demand I promise to pay Anil Verma or order the sum of rupees fifty thousand only.»

Banks and finance companies often take a DPN along with a loan agreement.

Between people a DPN suits short loans where the date is still open.

Write the demand later in a letter or message that names the note and its date.

A second example with a DPN

Meena runs a tailoring shop in Chennai and lends ₹50,000 to a supplier.

The supplier signs a demand note with no interest on 5 November 2026.

In March Meena asks for the money by message and by letter.

The supplier pays ₹30,000 in March and ₹20,000 in April.

Meena gives a receipt each time and returns the note after the last payment.

Promissory note in Tamil and other languages

Many lenders in Tamil Nadu print the note in Tamil and English side by side.

Ask the maker to read the version they understand before signing.

Keep the amount in figures identical in both versions.

If the two texts differ, a dispute can turn on that difference.

Accounting entries for a business lender

A business that lends against a pronote records the loan as an asset.

The first month's interest is ₹1,00,000 × 10% ÷ 12, or ₹833.33.

The principal part of each installment grows as the balance falls.

Ask an accountant how your business reports interest income for tax.

Timing and record keeping

• Affix the stamp before the maker signs, as most lenders do.
• Hand over the money only after the note is signed.
• Pay by bank transfer when possible so the loan leaves a record.
• Keep a ledger with each date, amount, principal, interest and balance.
• Store the original note in a safe place and work from a photocopy.

Handling a dispute

Most disputes are about how much was already repaid.

Receipts signed by the lender settle that question quickly.

If the maker questions the signature, a witness who saw it signed helps.

If the maker questions the amount, the bank record of the loan helps.

Write to the maker with the ledger and ask for comments by a date.

If the dispute stays open, take the original note and records to a lawyer.

Writing the amount the Indian way

The word «only» at the end stops anyone from adding to the amount.

Use the lakh grouping in figures so the maker reads the sum at a glance.

Before handing over the money

• Check the maker's ID and keep a self-attested copy.
• Agree the rate and the schedule and write them on the note.
• Ask a witness to sign below the maker.
• Give the maker a photocopy of the signed note.
• Load the dates into a reminder tool or a calendar.

Ten minutes of checks at the start avoid most problems at the end.

Write down where the original note is kept and who has the copies.

A family member then knows where to find it if needed.

Check the ledger against the bank statement once a month.

Let the reminders go out on their own

Makatea sends the reminder before each installment on WhatsApp and records the payment. The balance of every note stays in one list. Try it free for 14 days, no card needed.