MSME delayed payment interest
What a late payment to a small supplier costs
Worked example
Using the default values, msme delayed payment interest gives a interest payable of ₹16,405.
| Item | Value |
|---|---|
| Accepted on | 1 April 2026 |
| Credit period allowed | 45 days |
| Payment was due | 16 May 2026 |
| Days overdue | 66 |
| RBI bank rate | 6.0% |
| Rate payable — three times | 18.0% a year |
| Compounded | Monthly |
| Interest | ₹16,405 |
| For comparison, simple interest | ₹16,274 |
| Invoice plus interest | ₹5,16,405 |
| Interest as % of invoice | 3.3% |
What you need
- Invoice amount
- Goods or services accepted on
- Paid on (or today)
- Written agreement
- Agreed credit period
- RBI bank rate
Questions
Does the 45-day clock start from the invoice or from delivery?
From the day the goods or services are accepted, not from the invoice date. If the buyer raises an objection in writing within 15 days, the clock starts when that objection is resolved.
What is section 43B(h)?
It disallows a deduction for amounts owed to micro and small enterprises unless paid within the MSMED time limit. The expense shifts to the year of actual payment, so a late payment increases taxable profit in the current year as well as attracting interest.
Does this apply to medium enterprises?
No. The delayed payment provisions cover micro and small enterprises only. Check the supplier Udyam registration to confirm the category.
Important
Under the MSMED Act a buyer must pay a registered micro or small supplier within the agreed period, capped at 45 days, or within 15 days where nothing was agreed in writing. Interest runs from the day after that at three times the RBI bank rate, compounded monthly, and it is payable whether or not the supplier asks for it. Separately, section 43B(h) of the Income-tax Act disallows the expense in the year it is claimed if payment is late — so a delayed payment costs interest and defers the deduction. Check the current bank rate on the RBI site before relying on this figure.