Free Loan Agreement Template for India
Formalise personal or business loans in India with a comprehensive Loan Agreement grounded in the Indian Contract Act 1872. Our template covers loan amount, interest rate, repayment schedule, security, and enforcement under Indian law — including NIA Section 138 cheque security.
| LOAN AMOUNT | 10,00,000.00 INR |
| LOAN PURPOSE | Business / Commercial Purpose |
| DISBURSEMENT DATE | 1 May 2026 |
| INTEREST RATE | 12% p.a. (simple) |
| REPAYMENT TYPE | Equated Monthly Instalments (EMI) |
| REPAYMENT PERIOD | 24 months |
| MONTHLY EMI | 47,073.00 INR |
| SECURITY | Unsecured (No Security) |
| TDS ON INTEREST | Not Applicable |
Prepayment: The Borrower shall be entitled to prepay the Loan in full or in part at any time after giving 15 days' prior written notice to the Lender, subject to payment of a prepayment premium of 2% on the amount prepaid.
Dispute Resolution: Any dispute arising out of or in connection with this Agreement shall be referred to arbitration under the Arbitration and Conciliation Act, 1996 ("ACA 1996"), with the seat and venue at Jaipur, Rajasthan. The award shall be final and binding. Either party may seek urgent interim relief from a court of competent jurisdiction under ACA 1996 s. 9. This Agreement shall be governed by the laws of the Republic of India.
What Is a Loan Agreement in India?
A Loan Agreement is a legally binding written contract between a lender and a borrower that documents the terms under which money is lent — including the principal amount, interest rate, repayment schedule, security (if any), and the consequences of default. In India, loan agreements are used for personal loans between family and friends, business loans between companies, property loans, vehicle loans, and inter-corporate deposits. A written loan agreement is critical in India because it creates a legally enforceable record of the debt and the agreed repayment terms, making it far easier to recover the loan if the borrower defaults.
Under the Indian Contract Act 1872, a loan agreement is a valid and enforceable contract provided it satisfies the essential elements — offer, acceptance, consideration (the loan amount), free consent, competent parties, and a lawful purpose. Indian courts have consistently enforced written loan agreements, particularly where the agreement specifies the principal, interest, and repayment terms clearly. Lenders should be aware that under the Usurious Loans Act 1918 (applicable in some states), courts have the power to re-open and revise unconscionably high interest rates, though this Act applies primarily to rural moneylending.
Stamp duty is a critical requirement for Indian loan agreements. Under the Indian Stamp Act 1899 and the relevant state Stamp Acts, a loan agreement (often documented as a promissory note or a deed of loan) must be stamped with the appropriate duty based on the loan amount and the state where the agreement is executed. An insufficiently stamped loan agreement is inadmissible as evidence in Indian courts until the deficit and penalty are paid. Security for loans — through a post-dated cheque (PDC) — provides the additional benefit of criminal action under Section 138 of the Negotiable Instruments Act 1881 if the cheque is dishonoured. For secured loans over immovable property, a mortgage deed under the Transfer of Property Act 1882 and registration under the Registration Act 1908 are required.
What's Covered in This Loan Agreement Template
Our India-specific Loan Agreement template covers all essential provisions for a legally enforceable loan under Indian law.
Lender & Borrower Details
Identifies the lender and borrower with full legal names, addresses, PAN, and Aadhaar (where required for large loans and tax reporting).
Principal Loan Amount
States the principal amount lent in Indian Rupees (₹) and confirms receipt of the funds by the borrower.
Interest Rate
Specifies the annual interest rate, whether simple or compound, and the basis on which interest is calculated. Notes the Usurious Loans Act 1918 limitation on unconscionable rates.
Repayment Schedule
Sets out the repayment schedule — monthly instalments (EMIs), lump sum, or custom schedule — with specific due dates and payment amounts in ₹.
Mode of Payment
Specifies acceptable payment methods — NEFT, RTGS, UPI, cheque — and the lender's bank account details for repayments.
Security & Post-Dated Cheques
Addresses any security provided by the borrower, including post-dated cheques (which trigger NIA s.138 rights if dishonoured) or personal guarantees.
Default & Acceleration
Defines events of default (missed payments, insolvency, misrepresentation) and the lender's right to accelerate the entire outstanding balance.
Late Payment Interest
Specifies additional interest on overdue amounts from the date of default, enforceable under the Indian Contract Act 1872 and the Interest Act 1978.
Prepayment
Addresses the borrower's right to prepay the loan with or without a prepayment penalty, and any notice required for prepayment.
Tax Implications
Notes TDS obligations on interest payments under the Income Tax Act 1961 and the reporting of large loans under anti-money-laundering provisions (PMLA 2002).
Stamp Duty Note
Notes the obligation to stamp the agreement under the Indian Stamp Act 1899 or the relevant state Stamp Act at the appropriate rate based on the loan amount.
Governing Law & Dispute Resolution
Specifies Indian law as governing and designates the appropriate civil court or arbitral tribunal for dispute resolution. Notes the right to approach the Debt Recovery Tribunal (DRT) for commercial loans above the threshold.
How to Create a Loan Agreement in India
Follow these steps to create a legally enforceable loan agreement under Indian law.
- 1
Agree on Key Terms
Agree on the principal amount, interest rate, repayment schedule (monthly EMIs or other), payment method, and any security (PDCs, mortgage, guarantee) before drafting.
- 2
Draft the Agreement
Prepare the agreement with all essential terms. Be specific about the repayment schedule — list each instalment date and amount in ₹. Include default and remedies clauses.
- 3
Stamp the Agreement
Execute the loan agreement on appropriately stamped non-judicial stamp paper under the Indian Stamp Act 1899. The stamp duty is based on the loan amount and varies by state. Insufficient stamping makes the document inadmissible as evidence.
- 4
Collect Security (if Any)
Collect any agreed security — post-dated cheques for each EMI (signed by the borrower), a personal guarantee, or a mortgage deed (which must be registered under the Registration Act 1908 for immovable property).
- 5
Report Large Loans for Tax & AML Compliance
For loans above ₹20,000, payment or repayment by cash is restricted under the Income Tax Act 1961. For large loans, consider reporting obligations under the Prevention of Money Laundering Act 2002 (PMLA). Keep a record of all repayments for tax purposes.
Legal Considerations for Loan Agreements in India
These are the critical Indian legal requirements for enforcing a loan agreement.
This template is for informational purposes only and does not constitute legal advice. Consult a qualified Indian advocate or legal practitioner for advice specific to your situation.
Reviewed for Indian law
Stamp Duty Under the Indian Stamp Act 1899
Loan agreements (whether as a promissory note or deed of loan) attract stamp duty under the Indian Stamp Act 1899 and the relevant state Stamp Act. The duty is typically calculated on the principal loan amount and varies by state. An unstamped or insufficiently stamped agreement is inadmissible as evidence in Indian courts until the deficit is cured. Parties must stamp the agreement before or at the time of execution.
NIA Section 138 — Post-Dated Cheque Security
A post-dated cheque (PDC) given as security for loan repayment is a common and powerful remedy in India. If the PDC is dishonoured on presentation, Section 138 of the Negotiable Instruments Act 1881 creates a criminal offence, punishable by imprisonment up to two years or fine (or both). The payee must send a demand notice within 30 days of dishonour. The criminal threat significantly improves recovery prospects for Indian lenders.
Cash Transaction Limits Under Income Tax Act 1961
Under the Income Tax Act 1961, accepting or repaying a loan of ₹20,000 or more in cash is prohibited — transactions must be through bank channels (NEFT, RTGS, cheque). Violation attracts a penalty equal to the loan amount. For large cash loans, additional reporting obligations under the Prevention of Money Laundering Act 2002 may also apply. Ensure all loan transactions in India are conducted through the banking system.
Debt Recovery Tribunal (DRT) for Commercial Loans
For commercial loans above ₹20 lakh (₹20,00,000), the lender (if a bank or financial institution) can approach the Debt Recovery Tribunal (DRT) under the Recovery of Debts and Bankruptcy Act 1993 for faster recovery. Non-banking lenders must pursue recovery through civil courts (District Court, High Court) or through arbitration under the Arbitration and Conciliation Act 1996. The Insolvency and Bankruptcy Code 2016 (IBC) is available for qualifying financial creditors.
Frequently Asked Questions
Document Your Indian Loan Today
Use Doxuno's free Loan Agreement template to create a legally enforceable loan document for India. Stamp it, collect your PDC security, and protect your lending rights under Indian law.
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