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MSME 45 days payment rule: deadline, interest, Section 43B(h) and what to do

The MSME 45 days payment rule says a buyer must pay a micro or small supplier within 45 days of accepting the goods or services, or 15 days if nothing is agreed in writing. Paying late costs the buyer interest and delays its tax deduction.

By , co-founder of Autobot 9 min read

What is the MSME 45 days payment rule?

Under section 15 of the MSMED Act, 2006, a buyer must pay a micro or small supplier by the date agreed in writing, at most 45 days after accepting the goods or services. With no written agreement, the limit is 15 days [1].

The Act defines a buyer as whoever buys goods or receives services for consideration, so the buyer can be of any size or type [1].

How are the 45 days counted?

The count starts on the day of acceptance, normally the day of delivery or service. If the buyer objects in writing within 15 days of delivery, it starts when you remove the objection. Otherwise the delivery day is the deemed acceptance day [1].

Your situation Payment due by Interest runs from
Written agreement of 30 days Day 30 Day 31
Written agreement of 60 or 90 days Day 45 Day 46
Nothing in writing Day 15 Day 16

Example: goods are delivered on 1 Sep 2026 and the buyer does not object. With nothing in writing, payment is due by 16 Sep and interest runs from 17 Sep. With a written 45-day term, payment is due on 16 Oct and interest runs from 17 Oct.

Who does the MSME 45 days payment rule cover?

It protects micro and small suppliers registered on the Udyam portal, not medium enterprises. Since 1 April 2025, a micro enterprise has investment up to ₹2.5 crore and turnover up to ₹10 crore, and a small one up to ₹25 crore and ₹100 crore [6].

Register before you supply. A 2021 Supreme Court ruling, Silpi Industries, was read to mean a supplier who registered after the contract could not use the Act. In January 2025 another bench disagreed with that reading but referred the question to a three-judge bench (NBCC (India) Ltd v State of West Bengal). We found no ruling from that bench [9]. Udyam registration is free [6].

What about traders?

  • Settled: the Act's "supplier" must be a micro or small enterprise with a registered memorandum (section 2(n)) [1]. The Ministry of MSME includes retail and wholesale trade as MSMEs "for the limited purpose of Priority Sector Lending" and lets traders register on Udyam [10].
  • Not settled: we found no official statement, circular or court ruling on whether a trader is a supplier under section 15, or for the buyer's tax deduction. The Finance Ministry says only that the rule covers enterprises "classified as such" under the MSMED Act [4]. Several adviser articles treat traders as outside the rule, and one says that view "has not been tested in courts yet" [11].

What is Section 43B(h), and what is Section 37(2)(g) now?

A buyer that pays a micro or small supplier later than section 15 allows can deduct that cost only in the year it pays. This was section 43B(h) of the Income-tax Act, 1961. From 1 April 2026 it is section 37(2)(g) of the Income-tax Act, 2025 [3][4][5].

The Finance Act 2023 added clause (h) from 1 April 2024, so it applies from assessment year 2024-25 [3]. The Finance Ministry gave the new section number in the Rajya Sabha on 21 July 2026 [4].

Pay by 31 March to keep the deduction in that year. Unlike other 43B items, paying after year-end but before the return due date does not help [3][5]. At a 25% tax rate, paying ₹3 lakh late pushes a ₹75,000 tax saving into a later year. The interest a buyer pays under section 16 is not deductible either (section 23) [1].

What is the MSME interest rate for delayed payment?

Interest is three times the RBI Bank Rate, compounded with monthly rests (section 16). The Bank Rate has been 5.75% since 7 October 2026, so the rate is 17.25% a year. Before that date it was 16.5%. A contract cannot lower it [1][2].

Interest on ₹5,00,000 unpaid at 17.25%:

Time late Interest Total due
1 month ₹7,188 ₹5,07,188
3 months ₹21,874 ₹5,21,874
6 months ₹44,705 ₹5,44,705
12 months ₹93,407 ₹5,93,407

We used the formula below with one rate for the whole period. If the Bank Rate changes while a payment is late, the exact figure can differ.

How do you calculate MSME interest on delayed payment?

Multiply the unpaid amount by (1 + R/12) raised to the months late, minus 1, where R is three times the Bank Rate. Months late is days late divided by 30.42 (365 divided by 12). Or use the free MSME interest calculator.

interest = amount × ((1 + R/12)^m - 1)
R = 3 × Bank Rate = 17.25% = 0.1725
m = days late ÷ 30.42

Example: ₹5,00,000, 90 days late. R/12 = 0.014375 and m = 90 ÷ 30.42 = 2.96. Interest = ₹5,00,000 × (1.014375^2.96 - 1) = about ₹21,568.

What is MSME Form 1 and when is it due?

MSME Form 1 is a half-yearly return in which companies tell the Registrar of Companies about dues to micro and small suppliers unpaid beyond 45 days. The April to September return is due by 31 October, the October to March return by 30 April [8].

It comes from an order under section 405 of the Companies Act, 2013, dated 22 January 2019 [8].

What should a supplier do about MSME delayed payment?

Check that you are covered and keep proof of delivery. Remind the buyer in writing, work out the interest and send a formal demand. If that fails, file on the ODR portal. You can also sell the invoice on a TReDS platform to get cash first.

  1. Check your cover: Udyam registration, micro or small class, and goods or services (see traders above).
  2. Put terms in writing: credit of 45 days or less on the quote, order and invoice, with your Udyam number on the invoice.
  3. Keep proof of acceptance, such as a signed delivery challan, courier receipt or email. The 45 days start there.
  4. Remind early. Our payment reminder message templates cover WhatsApp, SMS and email, in English and Hindi.
  5. Work out the interest with the calculator and send the buyer a statement of account.
  6. Send a written demand for the amount and interest. A lawyer can draft it.
  7. File on the ODR portal, odr.msme.gov.in.

The ODR application asks for both parties' details, the facts, supporting documents such as the work order, agreement and invoices, any payment received, and the amount, due date and interest you claim [12]. The first stage is voluntary and meant to finish within 15 days. If it fails, the case goes to the state Facilitation Council for conciliation or mediation, then arbitration [12].

Filing can strain the relationship. The Economic Survey 2025-26 notes that buyers may see a case as adversarial and stop placing orders. It estimates ₹8.1 lakh crore is locked in delayed payments [7].

TReDS is an electronic platform where financiers fund invoices of MSMEs that a buyer has accepted [13]. The Udyam portal lists InvoiceMart, M1xchange, RXIL and DTX India [6].

Did a 2026 notification change the MSME payment within 45 days rule?

No. The Bill as introduced does not touch section 15 (the 45 days) or section 16 (the interest), and the government's summary of the passed Act lists no change to them [14][15].

The Act adds a TReDS duty for central public sector enterprises, faster mediation and arbitration deadlines, and easier recovery of awards. It also tells courts to release at least half the award to the supplier if a challenge is pending for over six months [15]. Parliament passed it on 3 and 7 August 2026 [15].

Reports say a notification dated 12 October 2026 (S.O. 5575(E)) started sections 2 to 7, 11 and 13 to 17 of the Amendment Act on 15 October 2026, and section 12 on 15 December 2026. We could not open the Gazette copy to check. In the Bill, the new deadlines, land revenue recovery and court rule sit in sections 8 to 10, which that list does not mention [14][16].

MSME payment rules in Hindi

FAQ

Is there a notification for the MSME payment within 45 days rule?

There is no single notification. The 45-day limit is in section 15 of the MSMED Act, 2006. The tax rule came through the Finance Act 2023 (section 43B(h), from 1 April 2024). MSME Form 1 comes from a Ministry of Corporate Affairs order of 22 January 2019 [1][3][8].

Can a buyer and supplier agree to 60 or 90 days?

Not for a covered supplier. The Act says the agreed period shall in no case exceed 45 days, and the interest applies whatever the contract says (sections 15 and 16) [1].

Can a buyer fix the tax problem by paying after 31 March?

No. Paying after year-end moves the deduction to the year of payment, even if the buyer pays before filing its return. Clause (h) is excluded from the usual grace period [3][5].

Where do I file a complaint about delayed MSME payment?

On the MSME ODR portal, odr.msme.gov.in, which takes new cases from 15 October 2025 and is being integrated with the older Samadhaan portal [7].

Does the interest rate change?

Yes, it follows the RBI Bank Rate: 5.50% before 7 October 2026 gave 16.5% a year, and today's 5.75% gives 17.25%. Check the latest Bank Rate on the RBI site before you work out a figure [2].

Do I need Udyam registration to claim interest?

Yes. The Act defines a supplier as a micro or small enterprise that has filed a memorandum, which today means Udyam registration. It is free [1][6].

About the author

Rahul Vijay is a co-founder of Autobot (Convogenie Technologies, Bengaluru), an AI assistant with its own computer that works like an employee while you are away. This guide is general information, not legal or tax advice. Ask your CA or a lawyer about your own case.

Sources

All pages opened on 18 Oct 2026 unless noted.

  1. Micro, Small and Medium Enterprises Development Act, 2006, Gazette text as enacted (sections 2(b), 2(d), 2(n), 15, 16, 23). The 2026 Bill as introduced does not amend these sections. https://samadhaan.msme.gov.in/WriteReadData/DocumentFile/MSMED2006act.pdf
  2. Reserve Bank of India, notification RBI/2026-27/283 of 7 Oct 2026, Bank Rate raised from 5.50% to 5.75% with immediate effect. https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13728&Mode=0
  3. Finance Act, 2023 (No. 8 of 2023), section 13, amending section 43B of the Income-tax Act, 1961 from 1 Apr 2024 (copy of the Act text). https://database.taxsutra.com/articles/fd139f989ff09136ad8f7de30d577e/expert_article
  4. Rajya Sabha Unstarred Question 242, answered 21 Jul 2026, Ministry of Finance, and Question 159, 20 Jul 2026, Ministry of MSME (copies of the answers; the official copies are on sansad.in). https://a2ztaxcorp.net/wp-content/uploads/2026/07/RS-SECTION-43BH-OF-THE-INCOME-TAX-ACT-21.07.2026.pdf and https://a2ztaxcorp.net/wp-content/uploads/2026/07/RS-IMPACT-OF-SECTION-43Bh-FINANCE-ACT-2023-ON-MSMEs-21.07.2026.pdf
  5. Income-tax Act, 2025, section 37 (copy of the text), and PIB, "Income-tax Act, 2025 comes into force from today (1st April, 2026)", 1 Apr 2026. https://eztax.in/income-tax-act-2025/section-37 and https://www.pib.gov.in/PressReleasePage.aspx?PRID=2248005&reg=3&lang=2
  6. Udyam Registration portal (size limits effective 1 Apr 2025; registration free; TReDS platforms listed). https://udyamregistration.gov.in/
  7. Ministry of MSME, Annual Report 2025-26, paragraphs 1.7.1 and 2.11 (ODR portal for new cases from 15 Oct 2025; Economic Survey 2025-26 excerpt). https://www.msme.gov.in/static/uploads/2026/05/1bfda06b460e72543530b40817573495.pdf
  8. Ministry of Corporate Affairs, Specified Companies (Furnishing of information about payment to micro and small enterprise suppliers) Order, 2019, S.O. 368(E) dated 22 Jan 2019, under section 405 of the Companies Act, 2013. The MCA site blocked our fetch, so the due dates were read from two copies of the order: https://taxguru.in/company-law/mandatory-submission-e-form-msme-1-mca-companies-as-mca-notification-dated-22nd-jan2019.html and https://ibclaw.in/the-specified-companies-furnishing-of-information-about-payment-to-micro-and-small-enterprise-suppliers-order-2019/ . MCA instruction kit (not opened, blocked): https://www.mca.gov.in/content/dam/mca-aem-forms/instructionkits/Instruction%20Kit_MSME%20Form%20I.pdf
  9. Supreme Court of India, NBCC (India) Ltd v State of West Bengal, 2025 INSC 54, 10 Jan 2025 (discusses Silpi Industries (2021) 18 SCC 790 and refers the question to a three-judge bench). https://api.sci.gov.in/supremecourt/2022/24558/24558_2022_12_1501_58501_Judgement_10-Jan-2025.pdf
  10. Reserve Bank of India, circular RBI/2021-2022/67 of 7 Jul 2021, New Definition of MSMEs, Addition of Retail and Wholesale Trade. https://rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=12126
  11. Tax Tip, "Section 43B(h): MSME payment within 45 days" (adviser article, secondary source). https://taxtip.in/section-43bh-msme-payment-within-45-days-compliance-deduction-timing-litigation-risks/
  12. Ministry of MSME, Guidelines on the MSE Scheme on Online Dispute Resolution (ODR) for Delayed Payments (eligibility, application contents, pre-MSEFC and MSEFC stages). https://odr.msme.gov.in/assets/pdf/MSE_Scheme_on_ODR_for_Delayed_Payment_Guidelines.pdf
  13. Reserve Bank of India, TReDS FAQ. https://www.rbi.org.in/Scripts/FAQView.aspx?Id=132 . PIB explainer, 11 Aug 2026: https://static.pib.gov.in/WriteReadData/specificdocs/documents/2026/aug/doc2026811951101.pdf
  14. Micro, Small and Medium Enterprises Development (Amendment) Bill, 2026, as introduced in the Rajya Sabha on 28 Jul 2026. https://prsindia.org/files/bills_acts/bills_parliament/2026/MSME_Bill_2026.pdf
  15. PIB, "The MSMED (Amendment) Bill, 2026 passed by Parliament", 7 Aug 2026, https://www.pib.gov.in/PressReleasePage.aspx?PRID=2296358 , and PRS bill track (Rajya Sabha 3 Aug, Lok Sabha 7 Aug 2026): https://prsindia.org/billtrack/the-micro-small-and-medium-enterprises-development-amendment-bill-2026
  16. Commencement as reported, not read in the Gazette: TeamLease RegTech, 13 Oct 2026, https://teamleaseregtech.com/updates/article/60351/ministry-of-msme-commencement-of-provisions-of-the-msmed-amendment-act/ and IBC Laws, https://ibclaw.in/msme-development-amendment-act-2026-commencement-notification-no-so-5575e-dated-12-10-2026/