Lend to staff without an Excel sheet. EMI, recovery, write-off — handled inside payroll.
Issue salary advances, festival advances, PF loans and personal loans from the school. Inkwelly auto-calculates the EMI, generates the month-by-month recovery schedule, deducts each instalment in salary, and supports early repayment, skip months and write-offs — all linked to the payslip.
How most Indian schools manage staff loans today
The physical education teacher walks into the principal's office in October. His daughter's college admission fee is due in three weeks; he's asking for a ₹45,000 advance recoverable over six months. The principal nods and tells the accountant to make it happen. The accountant pulls out a green hardbound register titled Staff Loans 2024-25, writes a row, calls the bank to schedule a transfer, and tries to remember to deduct ₹7,500 from this teacher's salary every month from November through April. He writes a sticky note. The note falls behind a folder.
In January, the chemistry teacher asks for a Diwali festival advance — ₹10,000, no interest, recoverable over two months. The accountant adds another row to the register. In February, the previous PE teacher asks the accountant whether his loan deduction has been adjusted because he prepaid ₹15,000 in December. The accountant flips through three months of payslip PDFs to verify, finds two months where the deduction was right, one month where it was wrong, and starts manually computing the new EMI for the remaining tenure on a calculator.
By June, three teachers' loans are tracked in three different mental models. One has paid off, one has a write-off pending, one is overpaid. EPFO doesn't know about any of them. Form 16 at year end shows a deduction code that nobody can defend. This is what the loan register looks like in most Indian schools.
How Inkwelly Loans & Advances works
The accountant opens School → Employee Payroll → Loan & Advance and clicks New Loan. He picks the employee, picks one of four loanType enums — SALARY_ADVANCE, FESTIVAL_ADVANCE, PF_LOAN or PERSONAL_LOAN — enters loanAmount, interestRate (validated by the school's loan policy; some types are interest-free by definition), and tenure in months. Inkwelly's calculateEMI() helper computes the monthly EMI, displays the disbursement date and the amortisation schedule before the principal signs off. Approval stamps approvedBy and approvedAt; the loan moves from request state to ACTIVE.
From the next salary run, recovery happens automatically. Each amortisation row becomes a Loan Recovery line item with its own emiNumber (1 of 12, 2 of 12, etc.), tied to a pay period, and starts as SCHEDULED. When the payroll run processes, the line moves to DEDUCTED and shows up on the teacher's payslip with the loan reference, EMI number and remaining balance. If the teacher is on long leave or the payroll skips a recovery month, the line moves to SKIPPED with a skipReason — the system auto-extends the loan tenure or reschedules the recovery without manual recalculation.
Early repayment is a first-class flow. If the teacher pays a lump sum mid-tenure, Inkwelly's calculateNewTenureAfterPrepayment() recomputes either the remaining tenure or a smaller EMI — the school chooses the policy. After the final EMI, remainingAmount and remainingEMIs hit zero, the loan auto-closes with closedAt stamped and status moves to CLOSED. If a school decides to write off an outstanding amount — a teacher passing away, leaving without notice during F&F — the management committee approves a write-off, status moves to WRITTEN_OFF with writtenOffAt and reason captured for audit.
Four loan types Indian schools actually issue
- Salary Advance — short-term, often interest-bearing per school policy, recovered over 1–6 months from salary; the most common request
- Festival Advance — typically interest-free, around Diwali, Eid, Christmas or Holi, recovered over 2–3 months; matches the festival-advance benefit common in aided schools
- PF Loan — against the employee's provident fund balance under the Employees' Provident Funds Act; interest as per EPF rules and recovered through salary
- Personal Loan — longer tenure, interest-bearing, with full amortisation schedule; offered by larger schools as a staff welfare benefit
See the loan workbench in action
Auto-EMI calculation, no spreadsheet needed
The accountant enters loanAmount, interestRate and tenure — Inkwelly does the rest. The calculateEMI() helper produces the monthly EMI, the disbursement date and the full amortisation schedule before approval. For interest-free types like Festival Advance, the EMI is just principal divided by tenure. For interest-bearing PF or Personal Loans, the EMI uses the standard reducing-balance formula. The schedule shows principal vs interest split per month, useful when the school accounts the interest income separately. Approval shows the principal exactly what the staff member will see on the payslip from month one — no surprises later.
Salary recovery linked to every payslip
Every EMI is a Loan Recovery row. It carries an emiNumber, a pay-period link, a status (SCHEDULED → DEDUCTED or SKIPPED) and the amount. When the payroll run for a month processes, scheduled recoveries flip to DEDUCTED and show on the payslip as a separate deduction with the loan reference, EMI number and remaining balance after this deduction. The DeductionSourceType is set to LOAN_RECOVERY, so reports and Form 16 distinguish loan recovery cleanly from TDS, PF or ESI deductions. Teachers see exactly what is left on their loan every month, on every payslip. No more "sir, kitna baki hai mera advance ka?" after every payday.
Skip a month, the schedule reschedules itself
A teacher on three months of unpaid leave shouldn't have an EMI auto-deducted from a salary that doesn't exist. When a payroll run is configured to skip a recovery month — because the employee has zero salary, is on LOSS_OF_PAY, or the management has explicitly granted a moratorium — the corresponding Loan Recovery row moves to SKIPPED with skipReason captured. Inkwelly auto-shifts the remaining schedule forward; the loan stays ACTIVE, and the next salary cycle resumes recovery. No manual rescheduling, no missed EMIs hidden in someone's notebook.
Early repayment with policy choice
The teacher walks in with ₹15,000 cash to prepay. The accountant opens her loan, clicks Early Repayment, enters the amount, and Inkwelly's calculateNewTenureAfterPrepayment() shows two options: keep the EMI same and reduce tenure, or keep tenure same and reduce EMI. The school's policy decides which. Once recorded, the recovery schedule re-aligns, the audit log captures who took the cash and on which date, and the next payslip reflects the new remaining balance. When the loan is fully paid off through scheduled recoveries plus prepayments, status auto-flips to CLOSED with closedAt stamped — no manual closure step.
“Pehle Festival Advance ke deduction main hi gadbad ho jata tha, kabhi double deduction kabhi miss. Ab Inkwells khud salary se kaat leta hai, teacher ko payslip pe dikh jaata hai "3 of 6 EMI deducted, baki 3 baki hai". Ladai khatam.”
Real-world loan scenarios Inkwelly handles
Scenario 1 — ₹45,000 salary advance over 6 months. Teacher requests in October. Accountant creates SALARY_ADVANCE, ₹45,000, 6-month tenure, school's policy interest rate. EMI = ₹7,500. Principal approves, status moves to ACTIVE. From November payroll, ₹7,500 deducted automatically each month, payslip shows "EMI 1 of 6, balance ₹37,500". By April salary run, the loan auto-closes.
Scenario 2 — Festival Advance, prepaid early. Music teacher takes FESTIVAL_ADVANCE of ₹10,000 in October, recoverable over 2 months at ₹5,000 EMI. In November salary run, ₹5,000 deducted. In December, she walks in with ₹5,000 cash to close it. Accountant records prepayment; loan auto-closes; December salary has no deduction. Audit log: created Oct 15, EMI 1 deducted Nov 30, prepayment ₹5,000 received Dec 12, status CLOSED.
Scenario 3 — Loan running through long leave. Lab assistant takes a PERSONAL_LOAN of ₹1,20,000 over 24 months. After 8 EMIs, he goes on 4 months of unpaid medical leave. Recovery rows for those 4 months move to SKIPPED with skipReason: LOSS_OF_PAY_LEAVE. After he returns, the schedule resumes from EMI 9; final EMI shifts forward by 4 months. No manual recalculation by the accountant.
Scenario 4 — Write-off after employee resignation without notice. A staff member leaves abruptly mid-tenure with ₹18,000 outstanding. The school's F&F flow (Full & Final Settlement) recovers what it can; the management committee approves a write-off for the rest. Status moves to WRITTEN_OFF, writeOffDate and reason captured. The loan amount drops out of active recoveries but stays in the audit trail forever.
What the loan workbench gives you
- Per-employee loan summary across all active loans — useful when the same teacher requests a second advance and you need to see existing exposure
- Filter by
loanType, status, employee, session and tenure — e.g., "all active Festival Advances closing this quarter" - Loan ledger export per employee — every recovery, every prepayment, every skip, with dates, sources and approver
- Year-end loan deduction summary, ready for Form 16 reconciliation — separates loan recovery from TDS and PF deductions cleanly
- Auto-link loan recovery to pay periods and payroll runs so audit trails are reconstructable backwards from any payslip
- Settle outstanding loan during F&F — outstanding balance flows automatically into Full & Final Settlement recoveries
- Permission separation —
payroll.loan.createandpayroll.loan.approveare distinct in IAM; same person cannot self-approve their own request to a colleague
See loans recover automatically in payslips
20-minute walkthrough on a real school dataset — issue a loan, run a payroll, prepay it early, write off the balance.
Limits, safety and the small print
A loan cannot be edited once it reaches ACTIVE. If the principal needs to change the amount or tenure after approval, the loan must be closed (with the recovery schedule cleaned up) and a new one issued. This guarantees that the amortisation schedule the staff member saw at approval is the schedule that runs.
Loan creation and loan approval are governed by separate IAM permissions — payroll.loan.create and payroll.loan.approve — in Identity & Access Management. The accountant who creates a loan request cannot self-approve it; the principal, treasurer or management committee member with approval rights does. Approval, write-off and closure all stamp who-and-when in the audit log.
When an employee exits the school, every active loan automatically surfaces in their Full & Final Settlement calculation as an outstanding recovery. The settlement preview shows what is owed, what is being recovered from pending salary or leave encashment, and what the school is choosing to write off. Nothing falls through the cracks. The state move from ACTIVE to CLOSED or WRITTEN_OFF is final — reopening requires creating a new loan record. This matches what statutory auditors and CBSE inspection teams expect to see: a closed loan stays closed.
Issue staff loans without a register
Inkwelly Loans & Advances is included with every Employee Payroll subscription. Salary advances, festival advances, PF loans, personal loans — one workbench.
किस मॉड्यूल का हिस्सा
1 moduleअक्सर पूछे गए सवाल
7 सवालDoes Inkwelly support interest-free Festival Advances common in Indian schools?
Yes. `loanType: FESTIVAL_ADVANCE` is interest-free by default and recovered over 2-3 months from salary. Some schools choose to charge nominal interest — the field is configurable per loan, and the EMI calculator handles both cases. Diwali, Eid, Holi and Christmas advances are the typical use.
What happens to a running loan if a staff member exits the school mid-tenure?
The outstanding balance auto-surfaces in their Full & Final Settlement as an `otherRecoveries` line. The settlement preview shows recovery from pending salary, leave encashment and gratuity. If a balance remains after F&F, the management committee can approve a write-off, which moves the loan to `WRITTEN_OFF` status with the reason captured for audit.
Can I prepay part of a loan and choose between reducing EMI or reducing tenure?
Yes. The early-repayment dialog calculates both options using `calculateNewTenureAfterPrepayment()` and shows them side-by-side. The school's policy decides which option to take — most aided schools reduce tenure to keep the EMI predictable for the staff member's monthly budget.
How are loan recoveries shown on the payslip and in Form 16?
Each EMI is a separate deduction line on the payslip with the loan reference, EMI number (e.g., "3 of 12") and remaining balance after deduction. The `DeductionSourceType` is set to `LOAN_RECOVERY`, distinct from TDS, PF or ESI deductions. Form 16 reconciliation handles loan recovery as a non-tax deduction, not affecting taxable income.
What if a payroll skips an EMI — say the staff member is on unpaid leave that month?
The recovery row for that month moves to `SKIPPED` with a `skipReason` (LOSS_OF_PAY_LEAVE, MORATORIUM, ZERO_NET_PAY, etc.). The remaining schedule auto-shifts forward; the loan stays `ACTIVE` and resumes recovery from the next pay period. The accountant doesn't have to manually rebuild the amortisation.
Can a teacher request a second loan while one is still active?
Yes — multiple active loans per employee are supported. The Employee Loan Summary shows total outstanding across all active loans plus the cumulative EMI per month. The principal sees existing exposure before approving a new request, which is what most school management committees ask for before sanctioning.
Is loan approval workflow separated from creation?
Yes. `payroll.loan.create` and `payroll.loan.approve` are distinct IAM permissions. The accountant who creates the loan request cannot self-approve it; the principal, treasurer or management committee member with approval rights does. This separation of duties is required by most internal audit frameworks.
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