Buy from a micro or small enterprise? You must pay within 45 days (15 days if there is no written agreement). Pay late and two things happen: the supplier can charge interest at 3 × the RBI Bank Rate, compounded monthly, and if the bill is still unpaid at 31 March the buyer cannot deduct it that year — section 43B(h). Enter your bill to see the exact due date, interest and tax impact.
MSME 45-Day Payment Calculator — 43B(h) Tax & Interest
Paying (or waiting for) a micro or small supplier late? See the due date, the interest the supplier can claim, and how much extra income tax the buyer pays. MSME को देर से भुगतान — ब्याज और टैक्स का असर तुरंत जानें।
Guidance only, not tax or legal advice — confirm with your CA. Rules: MSMED Act 2006 sections 15, 16 and 23; Income-tax Act 1961 section 43B(h) (up to FY 2025-26) and Income-tax Act 2025 section 37(2)(g) (from tax year 2026-27). Verified 29 Sep 2026.
How the MSME 45-day payment rule works
| Rule | What it says |
|---|---|
| Due date (MSMED Act s.15) | Within the agreed credit period, but never more than 45 days from acceptance. No written agreement: 15 days. |
| Interest (s.16) | Compound interest with monthly rests at three times the RBI Bank Rate, from the day after the due date. At a 5.50% Bank Rate that is 16.5% a year. |
| Interest is not tax-deductible (s.23) | The buyer cannot claim the MSMED interest as an expense. |
| Tax deduction timing (Income-tax Act 1961 s.43B(h)) | If payment is made after the 15/45-day limit, the expense is allowed only in the year it is actually paid. Paying before the return due date does not help. |
| From tax year 2026-27 | The same rule continues under section 37(2)(g) of the Income-tax Act 2025. |
| Who is covered | Suppliers registered on Udyam as micro or small (manufacturing or services). Not medium enterprises; traders are disputed. |
Example
A micro supplier delivers goods worth ₹8,00,000 on 1 February 2026 with no written credit terms, so payment is due by 16 February 2026. The buyer pays on 10 July 2026 — 144 days late. The supplier can claim about ₹54,210 interest (16.5% compounded monthly). Because the bill was unpaid on 31 March 2026, the ₹8,00,000 is disallowed for FY 2025-26: a firm taxed at 31.2% pays about ₹2,49,600 more tax that year and gets the deduction back only in FY 2026-27.
Want the full rule in simple words? Read Section 43B(h) explained for buyers and suppliers (Hinglish), with checklists.
Common questions
Does 43B(h) apply if my supplier is a trader? Udyam registration for retail and wholesale traders was allowed mainly for priority-sector lending, and whether traders get the 45-day protection is disputed. Most CAs treat traders as not covered; confirm with yours.
Can we agree on 60 or 90 days? You can, but for this rule any agreed period above 45 days is treated as 45 days.
What if the supplier registered on Udyam after the order? Courts have held that the benefits apply only if the supplier was registered before the contract or supply, so check the registration date on the Udyam certificate.
How does a supplier recover the money? Send a written reminder quoting the MSMED Act, then file a free complaint on the MSME Samadhaan portal; the state Micro and Small Enterprises Facilitation Council handles it.
Where does the Bank Rate come from? The RBI announces it with each monetary policy; it was 5.50% after the August 2026 policy. Change it in the calculator if it moves.
Sources: Micro, Small and Medium Enterprises Development Act 2006 (sections 15, 16, 23); Income-tax Act 1961 section 43B(h); Income-tax Act 2025 section 37; RBI policy rates, August 2026. Rules last verified 29 Sep 2026.
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