The MSME 45 days payment rule says a buyer must pay a micro or small supplier within the time in a written agreement, and that time cannot be more than 45 days. With no written agreement, the limit is 15 days. If the buyer pays late, it owes interest, and under section 43B(h) it can claim the expense only in the year it pays.
- The rule comes from section 15 of the MSMED Act, 2006. The income tax part is section 43B(h) of the Income-tax Act, 1961, added by the Finance Act, 2023.
- From tax year 2026-27, the same income tax rule is section 37(2)(g) of the Income-tax Act, 2025.
- It protects only micro and small suppliers that have Udyam registration. Medium enterprises are not covered.
- Days are counted from the day the buyer accepts the goods or services, not from the invoice date.
- Late payment interest is three times the RBI bank rate, compounded monthly. With the bank rate at 5.75% (RBI, 7 October 2026), that is 17.25% a year.
What is the MSME 45 days payment rule?
Section 15 of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) sets the time a buyer has to pay a micro or small supplier.
| Situation | Buyer must pay by |
|---|---|
| Written agreement with a payment date | The agreed date. The agreed period cannot be more than 45 days from acceptance |
| No written agreement | Before the "appointed day", that is within 15 days of acceptance |
| Agreement says 60 or 90 days | Still 45 days. The law caps the agreed period at 45 days |
If the buyer misses the date, two things follow:
- Interest for the supplier under section 16 of the MSMED Act (see interest on late payment).
- A tax cost for the buyer under section 43B(h): the expense is allowed only in the year the buyer actually pays (see section 43B(h)).
The MSMED Act rule is not new. The tax rule in section 43B(h) is the "new MSME rule" people search for. It applies from the financial year 2023-24 (assessment year 2024-25).
Who does the 45-day rule apply to?
The rule depends on who the supplier is. The buyer can be any business.
| Supplier | Covered? | Why |
|---|---|---|
| Micro enterprise with Udyam registration | Yes | Section 2(n) of the MSMED Act |
| Small enterprise with Udyam registration | Yes | Section 2(n) |
| Medium enterprise | ✗ | Section 2(n) covers only micro and small |
| Micro or small business without Udyam registration | ✗ | A "supplier" must have filed its memorandum (Udyam) |
| Retail or wholesale trader with Udyam registration | ✗ (our reading) | Traders are MSMEs only for priority sector lending (RBI circular, 7 July 2021) |
To check if a supplier is micro or small, see the MSME limits from 1 April 2025. The category is on the supplier's Udyam certificate. You can verify its Udyam number on the official portal.
Is there a turnover limit for the 45-day rule? Not for the buyer. Section 43B(h) speaks of "any sum payable by the assessee" with no turnover limit (our reading). The limits that matter are the supplier's: micro and small limits on investment and turnover.
How to calculate 45 days for MSME
Count from the day of acceptance of the goods or services. The invoice date does not start the clock.
- Day of acceptance: the day the goods are delivered or the service is done.
- Day of deemed acceptance: if the buyer raises no written objection within 15 days of delivery, the delivery day counts as acceptance.
Example (our reading). Goods are delivered and accepted on 1 March 2027.
| Payment terms | Last day to pay |
|---|---|
| Written agreement for 45 days | 15 April 2027 |
| Written agreement for 30 days | 31 March 2027 |
| No written agreement | 16 March 2027 (the appointed day is 17 March) |
Section 43B(h) of the Income-tax Act
Section 43B lists expenses a business can claim only when it actually pays them. Clause (h), added by the Finance Act, 2023, covers:
"any sum payable by the assessee to a micro or small enterprise beyond the time limit specified in section 15 of the Micro, Small and Medium Enterprises Development Act, 2006"
What this means for a buyer:
- If you pay within the section 15 time limit, you claim the expense in the normal way.
- If you pay after the limit, you claim the expense only in the year you actually pay.
- The usual relief in section 43B, "paid before the return due date, so allowed in the same year", does not apply to clause (h). The section's proviso says so in words: "except the provisions of clause (h)".
- "Micro enterprise" and "small enterprise" have the meanings in section 2 of the MSMED Act (Explanation 4 to section 43B).
So the date that matters for the tax rule is the section 15 date, not 31 March and not the return due date.
Section 43B(h) example (now section 37(2)(g))
This example is in tax year 2026-27, so the section that applies is 37(2)(g) of the Income-tax Act, 2025. The result would be the same under section 43B(h) for FY 2025-26 and earlier.
Example (our reading). A company buys raw material worth ₹2,00,000 from a micro enterprise with Udyam registration. The goods are accepted on 1 March 2027. The written agreement gives 45 days, so the last day to pay is 15 April 2027.
| When the buyer pays | Tax year in which the ₹2,00,000 is allowed |
|---|---|
| 10 April 2027 (within 45 days) | 2026-27, in the normal way |
| 20 April 2027 (late) | 2027-28, the year it is paid |
| Not paid at all | Not allowed until it is paid |
The buyer that pays late on 20 April 2027 also owes interest to the supplier from 16 April 2027 under section 16 of the MSMED Act.
Section 43B(h) under the Income-tax Act, 2025: section 37(2)(g)
The Income-tax Act, 2025 applies from tax year 2026-27 (1 April 2026 onwards). It keeps this rule:
| Income-tax Act, 1961 | Income-tax Act, 2025 | |
|---|---|---|
| Section | 43B(h) | 37(2)(g) |
| Applies to | FY 2025-26 (AY 2026-27) and earlier, back to FY 2023-24 | Tax year 2026-27 onwards |
| "Paid before return due date" relief | Not for clause (h) | Not for clause (g) (section 37(3)) |
Section 37(2)(g) reads:
"amount payable by the assessee to a micro or small enterprise beyond the time limit specified in section 15" of the MSMED Act.
What is section 43B of the Income-tax Act?
Section 43B allows these expenses only in the year they are actually paid:
| Clause | Expense |
|---|---|
| (a) | Taxes, duties, cess or fees under any law |
| (b) | Employer's contribution to provident fund, superannuation, gratuity or other employee welfare funds |
| (c) | A sum under section 36(1)(ii) (bonus or commission to employees) |
| (d) | Interest on loans from a public financial institution, state financial corporation or state industrial investment corporation |
| (da) | Interest on loans from notified non-banking financial companies |
| (e) | Interest on loans from scheduled banks and co-operative banks (with some exclusions) |
| (f) | Leave encashment owed by an employer |
| (g) | Sums payable to Indian Railways for use of railway assets |
| (h) | Sums payable to a micro or small enterprise after the section 15 time limit |
For clauses (a) to (g), payment before the due date of the income tax return is enough to claim the expense in the same year. Clause (h) does not get this relief.
Interest on late payment to MSME
Section 16 of the MSMED Act says a buyer that pays late must pay compound interest with monthly rests at three times the bank rate notified by the Reserve Bank of India. Interest runs from the appointed day, or from the agreed date.
| Bank rate (RBI, 7 October 2026) | MSME late payment interest |
|---|---|
| 5.75% | 17.25% a year, compounded monthly |
Example (our reading). ₹2,00,000 paid one month late: 17.25% ÷ 12 = 1.4375% for the month, so interest of ₹2,875. For later months, interest is added to the amount before the next month's interest is worked out.
Two more rules:
- The buyer cannot claim this interest as a deduction for income tax (section 23 of the MSMED Act).
- A buyer that has its accounts audited must show the amounts unpaid to micro and small suppliers in its accounts (section 22).
As of 10 October 2026: the bank rate is 5.75%. It changes when RBI changes it. We will update this table after each RBI policy.
What happens if MSME is not paid within 45 days?
The supplier can ask the buyer for the payment with interest. If the buyer does not pay, the supplier can refer the dispute to the Micro and Small Enterprises Facilitation Council (MSEFC) of its state (section 18 of the MSMED Act).
The online route is the MSME Samadhaan portal (samadhaan.msme.gov.in), run by the Ministry of MSME since 30 October 2017.
- Who can apply: any micro or small enterprise with valid Udyam registration.
- What the council does: it examines the case and can direct the buyer to pay the amount with interest.
- Time limit: the council should decide within 90 days of the reference.
- If the buyer challenges the award in court: the buyer must first deposit 75% of the award amount.
If you are a supplier without Udyam registration, register first. See Udyam registration.
MSME Form 1 return: who files and due dates
Companies report late payments to micro and small suppliers to the Ministry of Corporate Affairs in MSME Form I, a half-yearly return.
| Period | Due date |
|---|---|
| April to September | 31 October |
| October to March | 30 April |
- Who must file: a company that has payments pending to a micro or small enterprise for more than 45 days from acceptance. This limit was added on 15 July 2024 (S.O. 2751(E)).
- What it reports: amounts paid within 45 days, amounts paid after 45 days, amounts still unpaid, and the reason for the delay.
- Wrong or incomplete details: the form points to the penalty in section 405(4) of the Companies Act, 2013.
- MSME Form I applies to companies. It is filed on the MCA portal.
Next due date (as of 10 October 2026): 31 October 2026, for April to September 2026.
Is the MSME 45 days payment rule postponed or extended?
No. As of 10 October 2026, the rule is in force:
- Section 15 of the MSMED Act still sets the 45-day limit.
- Section 43B(h) applies to FY 2023-24 to FY 2025-26, and section 37(2)(g) of the Income-tax Act, 2025 carries the same rule from tax year 2026-27.
MSMED (Amendment) Bill, 2026: Parliament passed it in August 2026. It adds mediation within 90 days, arbitration and an award within set times, and payment of central public sector invoices through TReDS. These changes start only on dates the government notifies. We found no such notification as of 10 October 2026. The official summaries we read (PIB, PRS) do not mention any change to the 45-day limit or the interest rate.
Frequently asked questions
What happens if MSME is not paid within 45 days?
The buyer owes compound interest at three times the RBI bank rate, and it can claim the expense only in the year it pays (section 43B(h)). The supplier can also go to the MSE Facilitation Council through the MSME Samadhaan portal.
What is the new MSME rule of 45 days payment?
It is section 43B(h) of the Income-tax Act, added by the Finance Act, 2023. A buyer that pays a micro or small supplier after the section 15 limit gets the expense only in the year of payment.
How to calculate 45 days for MSME?
Count from the day the buyer accepts the goods or services. If the buyer raises no written objection within 15 days of delivery, the delivery day counts as acceptance.
Where can I find the MSME 45 days payment rule notification in PDF format?
There is no separate notification. The rule is in section 15 of the MSMED Act, 2006, and section 43B(h) of the Income-tax Act, 1961, which the Income Tax Department publishes on incometaxindia.gov.in.
What is section 43B of income tax?
It lists expenses allowed only when actually paid, such as taxes, employer's fund contributions, bank loan interest and, under clause (h), dues to micro and small suppliers paid late.
Who is subject to Section 43B(h) of the Income Tax Act?
Any business that buys from a micro or small enterprise registered on Udyam and claims the purchase as an expense. Medium enterprise suppliers are not covered.
Is the MSME 45 days payment rule applicable on traders?
Traders are MSMEs only for priority sector lending (RBI, 7 July 2021). Our reading is that supplies from a trader are not covered by the 45-day rule or section 43B(h).
From which date does the MSME 45 days payment rule apply?
The tax rule applies from the financial year 2023-24 (assessment year 2024-25). The 45-day limit in the MSMED Act is older.
Is the MSME 45 days payment rule postponed?
No. As of 10 October 2026, it is in force. From tax year 2026-27, it is section 37(2)(g) of the Income-tax Act, 2025.
What is the interest rate for MSME delayed payments in 2026?
Three times the RBI bank rate, compounded monthly. With the bank rate at 5.75% (7 October 2026), that is 17.25% a year.
Is it mandatory to file MSME Form 1?
Yes for a company that has payments pending to a micro or small supplier for more than 45 days from acceptance (rule since 15 July 2024).
What are the due dates for MSME Form 1?
31 October for April to September, and 30 April for October to March.
Can the buyer and supplier agree to 60 or 90 days?
No. The agreed period cannot be more than 45 days from acceptance, under section 15 of the MSMED Act.
Hinglish mein sawaal
MSME 45 din payment rule kya hai?
Buyer ko micro ya small supplier ko 45 din ke andar payment karna hota hai. Agreement nahi hai to 15 din. Late payment par interest lagta hai aur kharcha usi saal milta hai jab payment hota hai.
Section 43B(h) kis par lagta hai?
Har business par jo Udyam registered micro ya small supplier se maal ya service leta hai. Medium enterprise aur trader supplier par yeh rule nahi lagta (trader wali baat hamari reading hai).
Supplying to companies on credit? Get your Udyam registration so the 45-day rule protects you.
Last reviewed: 10 October 2026
FilingSetu is the brand of ANR Consultancy, a partnership firm.
GSTIN: 07ACOFA0324K1ZG
This page explains the law as it stands on the review date. It is not advice on your specific case.
