Kaagazaat

Director or Relative Loan to the Business

At a glance

Price: Free, always.
Stamp duty: Stamp duty depends on what the paper does and on the Schedule to the Indian Stamp Act, 1899 as applied in Punjab and in Chandigarh.
Registration: Not compulsorily registrable unless it creates or transfers a right in immovable property (section 17, Registration Act, 1908); this paper is not meant to.
Witnesses: Not required by law, but two adult witnesses who are not parties, each writing name, address and ID reference beside the signature, make a later denial harder.

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Also called

director loan agreement
loan from director to company
partner loan to firm
unsecured loan from relative
promoter loan
loan from family to business
related party loan
loan from friend to company

When you need it

A director, a partner or a relative of the owner lends money to the business: a company, a firm or a proprietor's own business. Putting the loan in writing matters because banks, auditors and the tax authorities will ask where the money came from and whether it is a loan or the lender's capital, and because a company that takes money from a director or a relative is subject to the Companies Act rules on deposits and on declarations from the lender.

This agreement records the amount, whether interest is charged and how much, how and when it is repaid, that the money came from the lender's own funds by banking channels, and (for a company) the declaration that the money is not borrowed from someone else. The rules on what a company may accept from its directors and their relatives without it being treated as a public deposit are detailed and change; this document records the points and leaves the exact condition to be confirmed. Not for a loan between friends and relatives where the borrower is a person (use the Loan Agreement between Friends and Relatives). Not for a bank loan, or a loan with property as security (use the loan against property).

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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

Stamp duty depends on what the paper does and on the Schedule to the Indian Stamp Act, 1899 as applied in Punjab and in Chandigarh. An agreement of this kind is usually charged as an agreement not otherwise provided for, at a modest fixed figure, but the figure is not stated here: confirm it on the official e-stamping portal or with the Sub-Registrar before buying the stamp. If a clause makes the paper in substance something else (a transfer of property, a lease, a power of attorney, a guarantee), it is charged as that. An under-stamped paper cannot be used as evidence until the deficit and penalty are paid.

Registration

Not compulsorily registrable unless it creates or transfers a right in immovable property (section 17, Registration Act, 1908); this paper is not meant to. Registration is optional if the parties want it.

Notarisation

Not required by law, and not a substitute for stamping. A notary only records that the signatories appeared and signed, which makes it harder to deny a signature later. Carry original photo ID.

Witnesses

Not required by law, but two adult witnesses who are not parties, each writing name, address and ID reference beside the signature, make a later denial harder.

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Sample preview — placeholder answers, not your data

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LOAN AGREEMENT: LOAN BY A DIRECTOR, PARTNER OR RELATIVE TO THE BUSINESS

This Agreement is made at Chandigarh on 3 April 2026.

BETWEEN

Jaspal Singh Sandhu, of House No. 9, Sector 21-A, Chandigarh 160022, PAN AKJPI4432R, who is a director of the company (the "Lender");

AND

Sandhu Handicrafts Private Limited, a company, of SCO 14, Sector 17-C, Chandigarh 160017, acting through Harleen Sandhu, Director (the "Business").

1. THE LOAN

1.1 The Lender has lent and the Business has received ₹15,00,000 (Rupees Fifteen Lakh only) (the "Loan") on 1 April 2026 for working capital for the business. The Loan was advanced by bank transfer as follows, and the Business acknowledges receipt: Transfer from the lender's HDFC Bank account no. XXXX4321 to the business's PNB account, reference UTR 123456789012.

1.2 The Lender declares that the Loan is made from the Lender's own funds, which are taxed or lawfully held, through banking channels, and that it is not money borrowed from, or received as a deposit or loan from, any other person.

1.3 The Loan is unsecured. It is a loan and not a contribution to the Business's capital, and gives the Lender no share in its profits, ownership or management beyond the interest and repayment in this Agreement.

2. INTEREST

2.1 Interest is charged on the Loan at 9 per cent a year from 1 April 2026 until repayment (nil meaning no interest is charged). The Business shall pay the interest every year, at the end of the financial year. Where the law requires the Business to deduct tax at source from interest it pays the Lender, it shall deduct it and give the Lender the certificate for it.

2.2 The Parties confirm that the interest rate is fair for a loan of this kind and is not meant to move profit between them or to avoid tax. Interest is paid and received by banking channels.

3. REPAYMENT

3.1 The Business shall repay the Loan in one payment of the whole amount on the date stated below, with interest (the fixed date being 2 April 2026), together with all interest due. The Business may repay early without penalty. All payments are made by bank transfer to the Lender's account.

3.2 If the Business does not pay any amount when due and does not put it right within thirty days of written notice, the whole Loan and interest become due at once, and interest continues to run on the unpaid amount at the same rate until payment.

4. COMPANY AND LEGAL POINTS

4.1 Where the Business is a company: its Board has approved this Loan by resolution, with the Lender, if a director, having disclosed his or her interest and not voting; the Loan is accepted in compliance with the Companies Act, 2013 and the rules on deposits, including any written declaration from the Lender that the law requires and any return the Company must file; and the Company shall record the Loan as a loan in its books and in its financial statements.

Questions about this document

Does the Director or Relative Loan to the Business need stamp paper or stamp duty in Punjab and Chandigarh?

Stamp duty depends on what the paper does and on the Schedule to the Indian Stamp Act, 1899 as applied in Punjab and in Chandigarh.

See the full position on stamp duty, registration and witnesses

Does the Director or Relative Loan to the Business need registration in Punjab and Chandigarh?

Not compulsorily registrable unless it creates or transfers a right in immovable property (section 17, Registration Act, 1908); this paper is not meant to.

See the full position on stamp duty, registration and witnesses

What does the Director or Relative Loan to the Business cost on Kaagazaat?

Free, always.

Does the Director or Relative Loan to the Business need witnesses?

Not required by law, but two adult witnesses who are not parties, each writing name, address and ID reference beside the signature, make a later denial harder.

See the full position on stamp duty, registration and witnesses

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