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MSME 45-Day Payment Rule (Section 43B(h)): How Buyers and Sellers Should Plan
MSME 45 दिन भुगतान नियम (43B(h)): खरीदार और विक्रेता क्या करें
MSME 45-day payment rule explained: who is covered, 15 or 45 days, expense disallowed if paid late, interest at 3 times bank rate, and what buyers and suppliers should do.
If you buy from a micro or small enterprise and pay late, the purchase is not allowed as an expense in that year's income-tax, and the supplier can claim heavy interest. The rule came in section 43B(h) of the Income-tax Act, 1961 from FY 2023-24 and continues in the Income-tax Act, 2025.
Who is covered
| Supplier | Covered? |
|---|---|
| Micro or small enterprise registered on Udyam as manufacturer or service provider | Yes |
| Medium enterprise | No |
| Supplier registered on Udyam only as a trader (retail / wholesale) | Generally no: trader registration is for priority lending, not the payment rules |
| Supplier not registered on Udyam | No |
The time limit
- No written agreement: pay within 15 days of accepting the goods or services
- Written agreement: pay by the agreed date, but not more than 45 days
- If paid in time, the expense is allowed even if payment falls after 31 March
- If paid late, the amount is allowed only in the year it is actually paid
- Interest on late payment: compound interest with monthly rests at three times the RBI bank rate (MSMED Act section 16), and this interest is not deductible in income tax
If you are the buyer
Know your MSME suppliers
Ask every supplier for the Udyam certificate and note the type (micro / small, manufacturer / service / trader) in the party master.
Put the terms in writing
A purchase order or agreement with credit days up to 45 gives you more time than the default 15 days.
Track due dates
Use bill-by-bill outstanding with credit days in BUSY, and check pending MSME bills every week. The free 43B(h) payment checker works from an Excel or BUSY outstanding list.
Year-end
Before 31 March, list MSME bills unpaid beyond their limit; your CA will add them back in the tax computation. Companies also file MSME Form 1 for dues over 45 days.
If you are the supplier
- Register on Udyam with the right activity, and print the Udyam number and payment terms on your bills
- Send polite reminders before the due date: payment reminders from BUSY
- Calculate interest on overdue bills inside BUSY with Bharat Laxmi
- For long-pending dues, the MSME Samadhaan portal handles delayed-payment cases
General information, not legal advice. GST and income-tax rules change often: check the latest notifications, circulars and GSTN advisories, and consult your CA or tax practitioner for your own case.
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Updated 2026-10-27 · Bharat Busy Care, Authorised BUSY Platinum Partner, Sri Ganganagar
FAQ
What is the 45-day rule for MSME payments?
Payments to micro and small enterprises must be made within 15 days of acceptance, or within the agreed period up to 45 days. If paid later, the buyer cannot claim the expense in that year's income tax.
Does 43B(h) apply to purchases from traders?
Generally no. Suppliers registered on Udyam only as traders are treated as outside the MSME payment rules. Manufacturers and service providers registered as micro or small are covered.
Does it apply to medium enterprises?
No. Only micro and small enterprises are covered.
What interest does the MSME supplier get on late payment?
Compound interest with monthly rests at three times the bank rate notified by the RBI, and the buyer cannot deduct this interest in income tax.
Is the rule still there under the new Income-tax Act, 2025?
Yes. The same rule is carried into the Income-tax Act, 2025, which applies from 1 April 2026.
More BUSY guides
- How to Calculate Bill-wise Interest on Party Outstanding (BUSY / Tally)
- Bill-by-Bill Outstanding and Receivables in BUSY
- Charge Interest on Late Payments From BUSY Ledgers
- How to Reply to a GST Notice (ASMT-10, DRC-01B, DRC-01C): Simple Guide
- Party Balance Confirmation Before Audit: How to Do It With BUSY
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