Kagaznama

Employee Loan Agreement

At a glance

Price: Free
Stamp duty: An agreement recording a loan and its repayment terms is chargeable under the Indian Stamp Act, 1899 as an agreement.
Registration: Not compulsorily registrable. s.17 of the Registration Act, 1908 does not reach a personal loan agreement that creates no interest in immovable property; nothing here does.
Witnesses: Not legally required for an agreement of this kind, but two witnesses are recommended, particularly where recovery depends on payroll deduction over many months and a dispute may arise well after signing, when memories of the circumstances have faded.

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Also called

Staff Loan Agreement
Salary Advance Agreement
Employer Loan to Employee
Karamchari Rin Karar
ਮੁਲਾਜ਼ਮ ਕਰਜ਼ਾ ਸਮਝੌਤਾ
कर्मचारी ऋण करार
Loan Against Salary
Company Loan to Staff

When you need it

An employer is advancing money to an employee — for an emergency, a festival advance, relocation, education for a child, medical treatment, or simply as a benefit of employment — and wants recovery terms fixed before the money leaves the account. Recovery is usually by deduction from monthly salary, and that deduction is itself regulated: s.7 of the Payment of Wages Act, 1936 permits deduction for recovery of an advance or loan, but s.7(3) caps total deductions from any one wage period, and s.12 fixes how an advance of wages may be recovered.

Get the recovery schedule wrong and the deduction itself becomes unlawful, whatever this Agreement says. There is also a tax dimension most employers miss: an interest-free or concessional loan from an employer is a taxable perquisite in the employee's hands under s.17(2)(viii) of the Income-tax Act, 1961 read with Rule 3(7)(i) of the Income-tax Rules, 1962, valued at the State Bank of India's lending rate on a loan of that type, less any interest actually charged — except where the aggregate outstanding loan does not exceed Rs 20,000, or the loan is for treatment of specified diseases under Rule 3A, in which case no perquisite value is added. This Agreement records that position so payroll can act on it correctly. For a loan an employer makes to its own staff, in Punjab or Chandigarh. Not for a loan between two individuals who are not employer and employee — use the Acknowledgement of Debt or a general loan agreement instead — and not for statutory retirement dues (gratuity, provident fund) or for an advance against expenses to be reimbursed, which are not loans at all.

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See stamp duty, registration and witnesses

What follows is written for Punjab and Chandigarh. It states the position there rather than describing how it varies, so the amounts below are the ones that apply — worth confirming at the sub-registrar’s office, because rates change. If the property is anywhere else in India, none of this is yours.

Stamp duty

An agreement recording a loan and its repayment terms is chargeable under the Indian Stamp Act, 1899 as an agreement. PUNJAB: Article 5, Schedule I-A to the Indian Stamp Act, 1899 as applicable in Punjab. Where the loan is unsecured, as this Agreement is unless the security option is chosen, the general agreement rate under Article 5 applies rather than the higher, security-specific rates; confirm the current figure and sub-clause with the Sub-Registrar or against the Department of Revenue, Rehabilitation and Disaster Management's published table at revenue.punjab.gov.in before the stamp is bought. E-stamp through the Stock Holding Corporation of India Limited (SHCIL). CHANDIGARH: the equivalent agreement article under the Chandigarh Administration's Rates of Stamp Duty & Registration Fees table at revenue.chd.gov.in; confirm the current figure at the Sub-Registrar's office, 30 Bays Building, before the stamp is bought. BOTH: stamp before or at signing; an unstamped or insufficiently stamped agreement is inadmissible in evidence under s.35 of the Indian Stamp Act, 1899 until the deficiency and any penalty are paid.

Registration

Not compulsorily registrable. s.17 of the Registration Act, 1908 does not reach a personal loan agreement that creates no interest in immovable property; nothing here does. Where the security option in this Agreement is chosen and the Employee gives security over specific property, the security document itself — not this Agreement — is the one to check separately for registration.

Notarisation

Not legally required. Notarisation adds nothing to the enforceability of a properly stamped and signed agreement, but is commonly done anyway for staff loans above a few months' salary, simply to fix the date and remove any later dispute that the Employee signed it.

Witnesses

Not legally required for an agreement of this kind, but two witnesses are recommended, particularly where recovery depends on payroll deduction over many months and a dispute may arise well after signing, when memories of the circumstances have faded.

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EMPLOYEE LOAN AGREEMENT

This Employee Loan Agreement (this "Agreement") is made at S.A.S. Nagar (Mohali) on 2 April 2026.

BETWEEN

Northline Analytics Private Limited, of Plot No. 8, Phase 8-B, Industrial Area, S.A.S. Nagar (Mohali) 160055, acting through Rohit Nair, Head of Human Resources, authorised by board resolution dated 4 March 2026 (the "Employer");

AND

Priya Malhotra, employee ID NLA-0442, designation Senior Analyst, PAN AAECN5678L, of House No. 1204, Sector 33-C, Chandigarh 160020 (the "Employee").

AND

Vikram Malhotra, of House No. 44, Sector 21, Panchkula (the "Guarantor"), who joins this Agreement to guarantee the Employee’s obligations as set out in clause 8.

The Employer and the Employee are each a "Party" and together the "Parties".

RECITALS

A. The Employee is employed by the Employer as Senior Analyst.

B. At the Employee’s request, the Employer has agreed to lend the Employee the sum of ₹1,50,000 (Rupees One Lakh Fifty Thousand only) for the following purpose: Medical treatment of the Employee’s spouse..

NOW THIS AGREEMENT WITNESSES as follows.

1. THE LOAN

1.1 The Employer shall disburse ₹1,50,000 (Rupees One Lakh Fifty Thousand only) to the Employee on 1 April 2026, By bank transfer to the Employee’s salary account.

1.2 The loan is personal to the Employee and is not assignable by the Employee to any other person.

2. INTEREST

2.1 The loan is interest-free

2.3 The aggregate outstanding loan does not exceed Rs 20,000 The Parties record this for the purpose of Rule 3(7)(i) of the Income-tax Rules, 1962: where the aggregate outstanding loan from the Employer to the Employee does not exceed Rs 20,000, no perquisite value arises on this loan under s.17(2)(viii) of the Income-tax Act, 1961, whatever the interest position stated in clause 2.1; where it exceeds Rs 20,000 and the loan is interest-free or concessional, a perquisite value arises and the Employer shall compute, report and withhold tax on it through payroll in accordance with law, valued by reference to the State Bank of India’s lending rate for a loan of this type as on the first day of the relevant financial year, reduced by any interest actually charged under clause 2.2.

3. RECOVERY

3.1 By equal monthly deductions from the Employee’s salary, in the number of instalments stated below

3.2 Where recovery is by salary deduction, the loan (with interest, if any, under clause 2) shall be recovered in 10 equal monthly instalments, the first deduction being made from the salary for November 2026 and one further instalment being deducted from each month’s salary thereafter until the loan is repaid in full. Each such deduction is made under s.7(2) of the Payment of Wages Act, 1936 as a deduction for recovery of a loan or advance, and the Employer shall ensure that this deduction, together with every other deduction from the same wage period, does not exceed the limit in s.7(3) of that Act; where it would, the Employer shall reduce the instalment for that month and extend the recovery schedule accordingly, without that reduction being a waiver of the balance owed.

Questions about this document

Does the Employee Loan Agreement need stamp paper or stamp duty in Punjab and Chandigarh?

An agreement recording a loan and its repayment terms is chargeable under the Indian Stamp Act, 1899 as an agreement.

See the full position on stamp duty, registration and witnesses

Does the Employee Loan Agreement need registration in Punjab and Chandigarh?

Not compulsorily registrable. s.17 of the Registration Act, 1908 does not reach a personal loan agreement that creates no interest in immovable property; nothing here does.

See the full position on stamp duty, registration and witnesses

What does the Employee Loan Agreement cost on Kagaznama?

Free.

Documents are free. Only kits are paid.

Does the Employee Loan Agreement need witnesses?

See the full position on stamp duty, registration and witnesses

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