The 45-day MSME payment rule explained
Direct answer
Under Section 15 of the MSMED Act, 2006, a buyer must pay a micro or small supplier by the date agreed in writing, and that date can never be later than 45 days after the buyer accepts the goods or services. If there is no written agreement, the limit is 15 days. Under Section 16, a buyer who pays late owes the supplier compound interest with monthly rests at three times the RBI bank rate. Under Section 43B(h) of the Income-tax Act (from assessment year 2024-25), the buyer can claim the expense as a deduction only in the year it actually pays a micro or small supplier beyond that limit.
Who the rule protects
The remedy is for micro and small enterprises. The Ministry of MSME says any micro or small enterprise with a valid Udyam registration can apply to the Facilitation Council. It covers supplies of goods and of services, and the buyer can be any buyer.
Medium enterprises are a point to check. Every official page we read speaks only of micro and small enterprises, and the Finance Ministry's reply on Section 43B(h) covers only them too. A medium supplier should not assume it has the Section 16 interest right or the Council route. Read your contract and ask a professional.
Buyers should ask suppliers for their Udyam certificate. Some commentators say the supplier must have been registered on the date of supply. We could not confirm that from an official source, so ask your CA.
How the days are counted
The clock starts on the day the buyer accepts the goods or services, or the day of deemed acceptance as the Act defines it. A written objection from the buyer can change the date, so read the definition in Section 2 of the Act.
Three cases, as the Development Commissioner (MSME) sets them out:
- No written agreement: payment is due after 15 days from acceptance. Interest runs from the day after that.
- Written agreement of 45 days or less: payment is due on the agreed date, and interest runs from there.
- Written agreement of more than 45 days: the agreement does not hold. The limit is 45 days from acceptance.
The agreement must be in writing. A verbal understanding does not move you off the 15-day default.
The interest
The buyer owes the unpaid amount plus compound interest with monthly rests at three times the bank rate notified by the RBI. The Ministry's FAQ says the Council should not award any other rate.
The monthly rate is 3 x bank rate ÷ 12. The RBI's own rates page, checked on 26 October 2026, shows the Bank Rate at 5.75%. Three times that is 17.25% a year, or 1.4375% a month.
Worked example. A buyer owes ₹1,00,000 on an invoice with a written 45-day term, and pays three full months after the due date:
- Month 1: ₹1,00,000 x 1.014375 = ₹1,01,437.50
- Month 2: ₹1,01,437.50 x 1.014375 = about ₹1,02,896
- Month 3: about ₹1,04,375
Interest is about ₹4,375. The RBI changes the bank rate from time to time, so check the rate that applies to the period of delay. Part months and a rate change in the middle of the delay need a professional's reading. Our MSME delayed payment interest calculator does the same sum with your own figures.
The tax effect of 43B(h) for the buyer
Section 43B(h) was inserted by the Finance Act, 2023. If a buyer owes a micro or small enterprise money beyond the Section 15 time limit, the buyer gets the deduction only in the year it actually pays. Booking the expense in the accounts is not enough.
The usual relief in Section 43B, paying before the return due date and still claiming in the earlier year, does not apply to this clause. That is what CBDT Circular 1/2024 says, as summarised on the ITAT Online page we read. A bill from a micro supplier left unpaid at 31 March beyond its limit loses its deduction for that year.
The Finance Ministry told the Rajya Sabha on 21 July 2026 that the provision applies the same way and that it corresponds to section 37(2)(g) of the Income-tax Act, 2025. We could not open the Act's text on the Income Tax Department site, so ask your CA to confirm the current wording and how it appears in the tax audit report.
What a supplier can do, step by step
- Write down the dates. Keep the invoice, the delivery proof, the purchase order and the written payment term.
- Send a written reminder. Say the amount, the invoice number, the due date and that interest under Section 16 applies. Keep proof of sending.
- For future orders, put the payment term in writing, up to 45 days. Without it, the 15-day default applies.
- File an application on the MSME ODR Portal (odr.msme.gov.in). The Samadhaan portal now sends new delayed payment applications there. You need a valid Udyam or Udyam Assist registration. You enter the buyer's details, the facts and the documents, and the interest you claim.
- Try the pre-Council stage. It is voluntary. It runs guided and online negotiation for 15 days, and 15 more if both sides agree, so 30 days at most. The buyer gets 3 days to reply.
- If that fails, the Micro and Small Enterprises Facilitation Council of your state takes over. It first tries conciliation, then arbitration, itself or through another body. Every reference must be decided within 90 days. The Council in your state is the one where your unit is registered, even if the buyer is elsewhere in India.
- After an award, a buyer who is not the supplier must deposit 75% of the award amount before any court will hear its application to set the award aside (Section 19).
The Ministry's ODR scheme says it will pay up to ₹4,000 per enterprise towards documentation and Council fees. The scheme is listed as running to 2026-27, so check it is still open.
What a buyer should do
- Keep a list of every micro and small supplier, with Udyam number, accepted date and agreed payment term.
- Pay before the limit, and before 31 March for dues that would otherwise cross the year end.
- Put the payment term in writing for every order. If you want 45 days, say 45 days.
- If you dispute the goods, say so in writing straight away.
- Companies should also report dues. The Ministry's FAQ tells statutory auditors to point out dues to micro and small suppliers in the annual accounts. MCA also has a half-yearly MSME return for companies. We could not open the MCA page, so confirm the form and due dates on mca.gov.in.
Common mistakes
- Counting from the invoice date, not the acceptance date.
- Assuming 45 days applies without a written agreement. It is 15.
- Treating a 60 or 90 day term in the purchase order as valid.
- Believing that payment before the return due date saves the deduction. For 43B(h) it does not.
- Thinking the tax effect depends on the supplier claiming interest. It does not. It depends only on when the buyer pays.
Frequently asked questions
Is it 45 days or 15 days? Fifteen days if there is no written agreement. With a written agreement, the agreed date, but never more than 45 days from acceptance.
Does the rule apply to a medium supplier? Not according to the official pages we read. Check your contract and take advice.
Where do I complain? On the MSME ODR Portal, which leads to the Facilitation Council of the supplier's state.
What lamp can and cannot do here
lamp can list your overdue supplier payments and their due dates from the records you connect, and prepare payment reminders or follow-up messages for your approval. lamp does not file complaints on the portal, compute tax or give legal advice. Your CA or a lawyer should confirm the dates, the rate and the tax treatment for your case.
Research sources
All checked on 26 October 2026. These are the pages we fetched.
- Ministry of MSME, RAMP: MSME Samadhaan
- MSME Samadhaan portal home page
- Ministry of MSME: Guidelines on MSE Scheme on Online Dispute Resolution for Delayed Payments
- Development Commissioner (MSME): FAQs on delayed payments to MSEs
- Development Commissioner (MSME): Delayed payments to micro and small enterprises
- RBI: current rates
- TaxGuru: Finance Ministry's Rajya Sabha reply on Section 43B(h), 21 July 2026 (a report of the reply, not the official text)
- ITAT Online: 43B(h) explained briefly (commentary that summarises CBDT Circular 1/2024)
We could not open the MSMED Act text on India Code, or the Income Tax Department and MCA pages. Their wording should be checked before anyone relies on this article.