You should not give more than Rs 20000 in cash 

you can pay by cheque loan given to borrower 

You may pay using digital mode of payment through NEFT/ RTGS Unlimited. No restrictions for legal payments through Bank to Bank account. 

You can execute the promissory note but you need to pay applicable stamp duty for the same

Hello,

1. There is  no maximum limit in terms of the amount which can be lent or borrowed. using a promissory note.
2. You will certainly have to prove that you had the capacity to lend the amount being sought to be recovered. This in effect means that you will be required to reveal the source in the event of a recovery.

- Yes, you can pay the said amount by way of P Note , and there is no limitation of the amount of payment . 

- Even if you will pay the amount via another sources , then also this RBI rule will be applied. 

1. Under the Income Tax laws, ANY CASH transaction over 20,000/- is illegal and has to be done by Cheque.

2. Under the state Money Lending laws, a Money Lender is legal only IF holding a Money Lending License.

3. For Recovery of any amount thru any Court, Money Lender has to prove that:

a) Person is having valid money lending license

b) Claim amount is reflected in "Sundry Debtors" under his own Income Tax Returns /Balance Sheet.

4. Without above, Recovery Suit /Claim shall fail, as per several SC /HC judgments.

You need to prove the source 

There is no limit to give accommodation loan through Promissory note. 

Only a Licensed money lender can charge interest while lending and all others loan would be gratuitous and without any interest. 

You are mentioning the RBI rules in this regard and asking the question about the limit?

If you want to lend amount to the borrower you can have cash transaction only up to Rs. 20,000/- and not Rs. 2 lakhs.

However you can issue cheque or DD or even online transfer and make a mention about the mode of transaction in the promissory nocte, which is also a valid transaction and legally enforceable when you file a money recovery suit in case of default of repayment of loan.

It is always better you create evidence for the source of income at least to the extent of the amount lent as loan.

There is no restriction on P note amount. Don't make cash transactions transfer by RTGS or NEFT.

Dear Sir/Madam,

It is suggested that  from your query is not clear that what advice is being sought by you. You are suggested to clarify the same, so that actual advice can be rendered. 

Hi 

1) There is no limit on whatsoever on what should be the amount mentioned in Promissory note. 

2) However, if the loan amount has distributed in the form of cash, then the lender has to

a) prove their source of funds 

b) That the loan was either based on personal relationship or based on money lending license. 

3) Please note that any transaction above Rs200000 should be through banking channels only .

4) It is not illegal in law to undertake transactions in cash for amounts in excess of Rs2Lakh..

5) However, it is avoidable from tax perspective. 

Hope this information is useful. 

1. These is no limit of lending on Promissory note. Try to lend money through bank transfer or cheque instead of cash. 

2. You just need to prove the capacity to lend the money and not source of fund in case of recovery suit.

As per the section of 269T of Income Tax Act, any person shall not repay or deposit any loan or advance in cash exceeding Rs 20,000. If any person violate the rule then the person will be liable to pay the penalty of sum equal to the loan amount