Under section 23 of the Code on Wages an advance given before employment is recovered from the first full wage period (no recovery of travel advances), while advances given after joining and advances of unearned wages follow the prescribed conditions. Rule 19 of the Code on Wages (Central) Rules, 2026 says the employer fixes the instalments so that recovery in any wage period does not exceed 50% of wages, and records it in Form IV (column 23). A separate advance ledger with the employee's signature is good practice.
Register of advances (format)
REGISTER OF ADVANCES AND LOANS
Establishment: [NAME] Year: [2026-27]
Sl. Emp. Name Date Type Amount Purpose Instalments Approved by
No. code given (advance/loan) agreed
1 E-014 Ravi Kumar 10/10/26 Salary advance 6,000 Medical 6 x 1,000 [NAME]
from Nov 2026
RECOVERY LEDGER: E-014 Ravi Kumar
Wage period Wages for Instalment 50% check Balance Date of Employee
the period recovered (max) due recovery initials
Nov 2026 20,308 1,000 10,154 OK 5,000 06/12/26 [ ]
Dec 2026 20,308 1,000 10,154 OK 4,000 06/01/27 [ ]
...
Apr 2027 20,308 1,000 10,154 OK 0 06/05/27 [ ]
Undertaking by employee: I received Rs. 6,000 on 10/10/2026 and agree to repayment in six monthly
instalments of Rs. 1,000 from my wages. If I leave earlier, the balance may be adjusted from my final dues.
Signature: ________ Date: ________How to fill it
- Write the advance on the day it is paid, with the amount in figures, the purpose and the approving person.
- Agree the instalments in writing. Keep each instalment well below half of the wage period's wages, because other deductions (PF, ESI, tax) also count towards the 50% overall ceiling under section 18(3).
- Each payroll, enter the instalment in Form IV column 23 and update the balance here.
- On exit, adjust any balance from final dues only to the extent the employee agreed in writing and within the deduction rules; see the full and final settlement format.
Advance, loan or perquisite?
An advance of wages is a part-payment of wages already due or soon due. A loan is a separate sum repaid over months, often with interest; section 24 and rule 20 leave the terms to government guidelines. For income tax, an interest-free or concessional loan is a perquisite valued at the State Bank of India rate for that purpose, but no value is charged where the loans in aggregate do not exceed ₹2,00,000, or are for treatment of specified diseases (rule 15, Table IV, Income-tax Rules, 2026). See perquisites basics.
The forms named here are those of the Central Rules, which apply where the Central Government is the appropriate government (for example central PSUs, banks, railways, mines, major ports and their contractors). For most shops, offices and factories the State Government is the appropriate government: follow your State's rules under the Labour Codes. Where a State has not yet notified final rules, section 69(2) of the Code on Wages keeps things done under the repealed Acts in force so far as they are not contrary to the Code, so many employers continue the earlier State formats. The Central formats contain every field the Codes ask for, which makes them a safe single layout.
Track it without a ledger book
FundRaksha HR records advances and loans, deducts the instalment on every payroll run, shows the balance on the payslip and closes the loan automatically.
Sources
Last reviewed: 2026-10-21. Information for Indian businesses; not legal advice.