Now a days due to the development in color printing technology the rate of counterfeit notes production and distribution is increasing. This is a massive problem, faced by almost all the countries. It affects the economy, sine it compromises the security of the real economy. Such counterfeit currencies are used to fuel nefarious motives, usually involving terrorist activities. According to the research, developing countries like India have been impacted by this very negatively. Even after the steps taken in 2016 to remove the counterfeits, by executing the demonetization of 500 and 1000 rupees bank notes in India the counterfeits of the new notes have begun circulating. This is due to the highly advanced technology adopted by the counterfeiters which makes the tracking of these counterfeit notes hard. This has become a very critical issue and the negative impact due to the counterfeit currency keeps rising. The only one solution for this problem for a common man is to detect the fake currency, by using the fake currency detector machine. These machines are used in banks and large scale business, but for a small business or for a common man these machines are not affordable. This paper gives the complete methodology of fake note detector machine, which is affordable even for a common man. By implementing the applications of image processing techniques we can find out whether the currency notes are fake or not. Image processing technique consists of a number of operations that can be performed on an image, some of which include image segmentation, edge detection, gray scale conversion etc. The proposed system will have advantages like simplicity, reliability and costs less.