A promissory note sounds simple — and it is — but it’s also one of the most powerful and underrated legal documents for lending or borrowing money in India. Whether the loan is between friends, family, business partners, investors, or even internal company dealings, a properly drafted promissory note can prevent disputes, protect relationships, secure money, and act as legal proof in case something goes wrong.
If you’re searching for a promissory note format, a sample template, or clarity on how to make it legally sound, this is the most complete and practical guide you’ll find.
Let’s break it down in a simple, conversational way.
What Is a Promissory Note?
A promissory note is a written and signed promise from the borrower stating that they will repay a specific amount of money to the lender on a specific date or on demand. That’s it. No complicated legal jargon required.
In India, a promissory note becomes valid when it is:
- In writing
- Contains a clear promise to pay
- Mentions a definite amount
- Signed by the borrower
- Free from conditions
- Properly stamped (as per state rules)
Think of it as a mini-loan agreement — simple, sharp, enforceable.
Why You Should Use a Promissory Note
Many Indians give loans informally — “tu tension mat le, I’ll return soon.” But when money is involved, clarity matters more than emotion.
A promissory note offers:
- Proof of loan
- Clear repayment terms
- Legal enforceability
- Protection from denials or delays
- Clarity in interest & repayment schedule
- Less risk of misunderstandings
A promissory note protects both sides:
📌 The lender gets assurance
📌 The borrower gets clarity and avoids future drama
Essential Elements of a Promissory Note Format
To create a strong promissory note format, ensure the document contains:
- Date and place of execution
- Name and address of borrower
- Name and address of lender
- Loan amount (in figures and words)
- Unconditional promise to repay
- Due date or mention “on demand”
- Interest rate, if any
- Repayment terms (lump sum or instalments)
- Default clause (late interest/penalty)
- Signatures of borrower
- Witness details and signatures
- Stamping as per state requirement
Missing any of these can weaken your document’s strength in a dispute.
Types of Promissory Notes (Choose the Right Format)
Not all loans are the same. Pick a promissory note format that matches your situation.
1. Demand Promissory Note
Repayable whenever the lender demands.
Perfect for:
- Personal loans
- Short-term borrowing
- Flexible replay agreements
2. Term Promissory Note
Has a fixed due date or a schedule.
Choose this when:
- Loan amount is large
- Instalments are planned
- Interest needs structured calculation
3. Secured Promissory Note
Backed by collateral (vehicle, jewellery, property, etc.)
4. Unsecured Promissory Note
No collateral. Purely based on trust and signature.
Each is legally valid — as long as the drafting is clean.
Ready-to-Use Promissory Note Format (India)
Below is a full promissory note format you can copy, print, and use today.
PROMISSORY NOTE
Date: __________________
Place: _________________
I, ___________________________________ (Borrower’s Full Name),
S/o / D/o / W/o ___________________________________,
residing at ____________________________________________________________,
hereby unconditionally promise to pay
Mr./Ms. ___________________________________ (Lender’s Full Name),
residing at ____________________________________________________________,
the amount of ₹________________ (Rupees __________________________________ only).
This amount shall be repaid:
[ ] On demand
OR
[ ] On or before __________________ (Due Date)
Principal Amount (in figures): ₹________________
Principal Amount (in words): ____________________________________________
Interest (if applicable): ______% per annum / per month
Repayment Mode:
[ ] Lump sum
[ ] Instalments as per schedule below:
| Installment No | Due Date | Amount (₹) |
|---------------|----------|------------|
| 1 | ________ | ________ |
| 2 | ________ | ________ |
| ... | ... | ... |
Late Payment Terms (if any):
_____________________________________________________________
Payment Method:
_____________________________________________________________
In case of default, the lender shall be entitled to recover the outstanding amount along with applicable interest/penalty as mentioned above.
Witness 1:
Name: _________________________
Address: _______________________
Signature: _____________________
Witness 2:
Name: _________________________
Address: _______________________
Signature: _____________________
Borrower’s Signature: ________________________
Borrower’s Name: ____________________________
Date: _______________________________________
Place: ______________________________________
This is a legally acceptable promissory note format in India, and you can modify it to suit your loan scenario.
Stamp Duty Requirements (Simple Explanation)
Promissory notes in India typically require stamp duty, and it varies by state. Here are the basics:
- Can be executed on Non-Judicial Stamp Paper
- Or can use adhesive stamps
- Value usually ranges from ₹1 to ₹100 depending on state
An unstamped or insufficiently stamped note may not be fully enforceable in court until stamp duty and penalty are paid.
Best rule:
📌 Use stamp paper of at least ₹10 or as per state rules.
How to Make a Promissory Note Legally Strong
Here are India-specific tips to ensure your promissory note format stands strong even if disputes arise:
1. Avoid vague language
Never write:
- “I will pay when possible”
- “I will try to repay”
Use:
- “I unconditionally promise to pay…”
2. Add amount in figures + words
This prevents manipulation or confusion.
3. Mention interest clearly
If there’s no interest, mention:
- “Interest: NIL”
4. Include repayment schedule
Dates + amounts = clarity.
5. Signatures are crucial
Borrower’s signature is the backbone of validity.
6. Get witnesses
This gives extra strength in disputes.
7. Keep original safely
Always store the original signed version — not just WhatsApp photos.
Common Mistakes People Make When Drafting Promissory Notes
Avoid these blunders:
- Using only digital copies without signing
- Not stamping the document
- Forgetting to mention due date
- Not adding interest terms clearly
- Giving loans without written proof
- Using confusing repayment terms
- Not mentioning place of execution
- Skipping witness signatures
A promissory note is meant to protect you — don’t weaken it with avoidable mistakes.
When You Should Use a Promissory Note
You should use a promissory note when:
- Lending money to a friend or family
- Giving a personal loan to an employee
- Providing business loans without going through banks
- Giving advances for investment or partnerships
- Borrowing money from an individual
- Recording debt between partners or relatives
Basically:
If money moves → documentation must follow.
When You Should NOT Use Only a Promissory Note
Avoid relying ONLY on a promissory note when:
- Loan amount is very large
- Collateral is high-value
- Business risks are complex
- Payments involve multiple conditions or stages
In such cases, use a full loan agreement along with the note.
Promissory Note vs Loan Agreement (Clear Comparison)
| Feature | Promissory Note | Loan Agreement |
|---|---|---|
| Simplicity | Very simple | Complex |
| Use case | Personal, small to medium loans | Large/secured loans |
| Clauses | Basic | Detailed |
| Legal strength | Good | Stronger |
| Time to draft | Minutes | Longer |
For everyday lending between individuals, promissory note format is more than enough.
Practical Examples (How to Use the Format)
Example 1: Lending ₹50,000 to a friend
Use:
- Demand promissory note
- No instalments
- No collateral
Example 2: Lending ₹5 lakhs to a relative for business
Use:
- Term promissory note
- Clear interest rate
- Instalment table
- Witness signatures
Example 3: Lending money secured against a vehicle
Use:
- Secured promissory note
- Collateral details
- Right to recover asset upon default
Quick Checklist Before Signing
Make sure your promissory note includes:
- Amount in figures & words
- Payment date
- Borrower’s signature
- Witnesses
- Interest clause
- Repayment method
- Stamp duty
If all of these are in place → you’re protected.
Related Reading on RupeeWisdom
- How to Start Investing in India (2025): The Ultimate Beginner’s Guide
- How to Save Money from Salary in India – Smart & Real Guide
- How to Retire Early in India: Practical Financial Freedom Guide
For broader context on personal finance and lending practices, see this resource from a reputable national financial regulator: Reserve Bank of India (RBI)
Conclusion
A promissory note is simple — but powerful. It protects both lender and borrower, avoids misunderstandings, and gives you legal backing if anything goes wrong. Whether you’re lending ₹5,000 or ₹5 lakh, using a proper promissory note format makes the deal transparent, fair and safe.
Use the template above, adjust as needed, stamp it properly, get signatures — and consider your loan protected.
If you ever lend money in India, don’t rely on verbal promises.
Document it. Secure it. Stay stress-free.
