A promissory note (pronote) is a signed, unconditional written promise to pay a fixed sum. On a pronote payable on demand you have 3 years from its date to sue. If no rate is written, the law applies 18% a year (₹1.50 sekda). Example: ₹50,000 at ₹1.50 sekda from 15 Jan to 25 Oct 2026 earns ₹7,000.
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What a promissory note (pronote) is
Section 4 of the Negotiable Instruments Act, 1881 defines a promissory note as a written instrument, signed by the maker, with an unconditional undertaking to pay a certain sum of money to a certain person, or to their order. In a loan, the borrower is the maker and the lender is the payee.
- "I promise to pay B or order Rs. 500" is a promissory note: the Act gives it as an example.
- "Mr. B. I.O.U. Rs. 1,000" is not one: the Act lists it among its examples of what is not a promissory note. Write a clear promise to pay instead.
- A promise with conditions ("after my marriage", "if D leaves me enough") is not one either. The promise to pay must be unconditional.
- Not "to bearer". Section 31 of the RBI Act, 1934 bars anyone except the RBI and the Central Government from making a promissory note payable to bearer. Write the lender’s name, "or order".
A note that gives no time for payment is payable on demand (section 19 of the same Act). A note can instead say it is payable on a fixed date, or in instalments; that changes the stamp and the time limit, as shown below.
Promissory note format: how to fill a pronote
- Place and date at the top. On a demand note the date starts the time limit, so write it clearly.
- Amount in figures and in words, the same in both places.
- Borrower’s full name, parent’s or spouse’s name and address, then "promise to pay".
- Lender’s full name and address, "or order". Never "bearer".
- "On demand", or the fixed date if you have agreed one.
- Interest in both forms, for example "₹1.50 per ₹100 a month (18% a year), simple, from this date". Writing both avoids any later argument about what "1.5 percent" meant.
- How the money was given: bank transfer, UPI or cheque, with the reference number. It ties the note to the payment.
- Revenue stamp, with the borrower’s signature and date written across it.
- Witnesses (optional): name, address and signature.
Pronote stamp duty: which revenue stamp
The Constitution gives Parliament the power to fix stamp-duty rates on promissory notes (Seventh Schedule, Union List, entry 91). The rate is in Article 49 of Schedule I to the central Indian Stamp Act, 1899. For a note payable on demand, a 2004 central notification (S.O. 130(E), from 1 March 2004) set these rates:
| Amount of the note | Stamp duty |
|---|---|
| Up to ₹250 | 5 paise |
| Over ₹250, up to ₹1,000 | 10 paise |
| Over ₹1,000 | 15 paise |
- Why a ₹1 revenue stamp? The duty is only a few paise, so people stick a ₹1 revenue stamp. Paying more than the duty is fine: the Act treats a document as duly stamped when its stamp is "not less than the proper amount" (section 2(11)).
- Cancel the stamp. Whoever signs on an adhesive stamp must cancel it so it can’t be used again, for example by writing their name or initials across it with the date (section 12). An uncancelled stamp counts as no stamp.
- A note payable on a fixed date falls under Article 49(b), with a duty linked to the bill-of-exchange rates that grows with the amount. Check the exact figure before writing one.
Unstamped or under-stamped pronote
Section 35 of the Indian Stamp Act says a document that should be stamped and isn’t cannot be used as evidence. Its proviso lets the court admit it once the missing duty and a penalty are paid: ₹5, or 10 times the missing duty if that is more. Until 2006 the central text left promissory notes out of this cure. Act 21 of 2006 removed that exception, so under the central Act an unstamped pronote can now be admitted on payment.
Don’t rely on that cure. Some states have their own stamp law or their own version of section 35, and older judgments treated an under-stamped pronote as unusable in evidence. Stamp the note properly when it is signed.
Pronote interest rate: what if no rate is written
When no rate is written on the note, section 80 of the Negotiable Instruments Act applies 18% a year, which is ₹1.50 sekda, "notwithstanding any agreement relating to interest between any parties to the instrument". It runs from the date the money ought to have been paid until it is paid. If you want a different rate, write it on the note, in both forms, and say from which date.
Try it in the calculatorSee 18% a year as ₹1.50 sekda in the rate converterA written rate is not automatically allowed in full. Some states cap the interest a lender may charge, and the limits differ: see legal interest rate in India and is lending money on interest legal.
Pronote validity: the 3-year limit
A pronote does not "expire", but the right to sue on it does. The Limitation Act, 1963 gives 3 years, counted from:
- Payable on demand: the date of the note (Article 35), not the day you ask for the money. This assumes no separate writing given with the note postpones the right to sue.
- Payable on a fixed date: the day it falls due (Article 31).
- Payable in instalments: each instalment’s due date (Article 36). If the note says the whole sum falls due on a missed instalment, from that default (Article 37).
Two things start a fresh 3 years, but only if they happen before the time runs out: a written acknowledgment of the debt signed by the borrower (section 18), or a payment towards it that is acknowledged in the payer’s handwriting or in a writing they sign (section 19). After the deadline, a court must dismiss a late suit even if the borrower doesn’t object (section 3). What can still help then is a fresh written promise, signed by the borrower, to pay the old debt: section 25(3) of the Indian Contract Act makes that a valid contract. The full rules, with a table of start dates, are in time limit to recover a loan.
Worked example: a ₹50,000 pronote at ₹1.50 sekda
A borrower signs a pronote on demand for ₹50,000 on 15 Jan 2026, with interest written as ₹1.50 per ₹100 a month (18% a year), simple. Interest is ₹750 a month.
- Interest to 25 Oct 2026: 9 months 10 days at ₹750 a month = ₹7,000, so ₹57,000 is due in all.
- Last day to sue, if nothing changes: 3 years from the date of the note, 15 Jan 2029.
- A signed part payment: on 15 Dec 2027 the borrower pays ₹5,000 and signs an entry for it. Interest due by then is ₹17,250 (23 months), so the whole ₹5,000 goes to interest: ₹12,250 of interest is still due and the principal stays ₹50,000. See why interest is cleared first.
- New last day: a fresh 3 years from the payment, 15 Dec 2030.
| Date | What happens | Last day to sue |
|---|---|---|
| 15 Jan 2026 | Pronote signed; the clock starts (Article 35) | 15 Jan 2029 |
| 25 Oct 2026 | Interest so far ₹7,000; total ₹57,000 | 15 Jan 2029 |
| 15 Dec 2027 | ₹5,000 paid and signed for; a fresh 3 years start (section 19) | 15 Dec 2030 |
If the same note had no rate written on it, the law would still apply 18% a year, but only from the date the money ought to have been paid. Writing the rate and "from this date" removes that question.
Try it in the calculatorCheck the ₹7,000 on ₹50,000 at ₹1.50 sekda, 15 Jan to 25 Oct 2026Sources
- Negotiable Instruments Act, 1881: section 4 (promissory note, with the I.O.U. illustration), section 19 (payable on demand), section 80 (18% when no rate is specified).
- Reserve Bank of India Act, 1934, section 31: only the RBI or the Central Government may issue a promissory note payable to bearer.
- Indian Stamp Act, 1899, with Schedule I (Finance Department, Government of West Bengal copy): sections 2(11) and 12, and Article 49 with the rates set by S.O. 130(E) of 28 January 2004.
- Indian Stamp Act, 1899, section 35: admitting an unstamped document on payment of duty and penalty, as amended by Act 21 of 2006.
- Constitution of India, Seventh Schedule (Legislative Department): Union List, entry 91, rates of stamp duty on promissory notes.
- Limitation Act, 1963: section 3 and Schedule Articles 31, 35, 36 and 37; section 18; section 19.
- Indian Contract Act, 1872: section 25(3), a written, signed promise to pay a time-barred debt.
- Income-tax Act, 2025, section 185: loans of ₹20,000 or more not to be taken in cash.
6 short answersPronote validity, interest and stamp: questions
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How many years is a pronote valid?
You have 3 years to sue on it. For a pronote payable on demand, they run from the date written on the note (Limitation Act, Article 35); for one payable on a fixed date, from that date (Article 31). A signed acknowledgment, or a signed part payment, made before the 3 years end starts a fresh 3 years.
What interest applies if no rate is written on the pronote?
18% a year, which is ₹1.50 sekda. Section 80 of the Negotiable Instruments Act applies this rate when the note names none, from the date the money ought to have been paid until it is paid. To charge a different rate, write it on the note in both forms: rupees per ₹100 a month and percent a year.
What revenue stamp value should a pronote have?
The central duty on a pronote payable on demand is 5 paise, 10 paise or 15 paise, depending on the amount (15 paise above ₹1,000). People usually stick a ₹1 revenue stamp, which is fine, since the stamp only has to be not less than the proper amount. The borrower signs across it with the date.
Is a pronote valid without a witness?
Yes. The legal definition asks for a written, unconditional promise to pay a certain sum, signed by the maker; it does not ask for witnesses. A witness or two still helps in practice: if the borrower later denies signing, someone who saw it can say so.
Is there a maximum amount for a promissory note?
No, the Negotiable Instruments Act sets no limit, and the stamp on a demand note stays at 15 paise above ₹1,000. But a borrower must not take a loan of ₹20,000 or more in cash (section 185 of the Income-tax Act, 2025), so lend by cheque or bank transfer and write the reference on the note.
Can I recover money on a pronote after 3 years?
Usually not by a suit on that note: a court must dismiss a suit filed after the time limit, even if the borrower doesn’t raise it. It is different if a signed acknowledgment or part payment restarted the clock in time, or if the borrower gives a fresh written, signed promise to pay. See the 3-year rule.