MSME 45-Day Payment Rule (Sec 43B(h))
Automate Section 15 statutory due dates, Section 16 monthly compound interest (3× RBI Bank Rate), and Section 43B(h) tax disallowances with instant Form 3CD tax audit disclosures.
MSME 45-Day Payment & Section 43B(h) Interest Calculator
Calculate mandatory statutory due dates, compound penal interest under Section 16 MSMED Act, and compute income tax disallowances under Section 43B(h) for Budget & FY 2024-25 / 2025-26.
Invoice & Supplier Credit Details
* Section 23 of MSMED Act forbids claiming this ₹89,459 as a tax-deductible expense in ITR.
DISCLOSURE UNDER SECTION 22 OF MSMED ACT, 2006 & SECTION 43B(h) INCOME TAX ACT: 1. Principal invoice amount outstanding: ₹2,50,000 2. Statutory payment due date (Sec 15): 29 Mar 2025 (45 days limit) 3. Delay beyond statutory limit: 556 days 4. Compound interest payable at 3x RBI Bank Rate (20.25% p.a. monthly rest): ₹89,459 5. Section 43B(h) Disallowance Status: DISALLOWED (Deduction denied in current FY until actual payment) 6. Additional Tax Liability @ 25%: ₹62,500 Note: Section 23 of the MSMED Act strictly prohibits claiming this penal interest as a deductible business expenditure.
Quick Reference Facts & Calculation Takeaways
Direct factual answers, formulas, and statutory limits verified for search models (ChatGPT, Perplexity, Gemini, Claude) and business executives.
Finance Act 2023 introduced Section 43B(h) into the Income Tax Act, 1961, making payments to Micro and Small Enterprises deductible strictly on actual payment basis within the time limit specified in Section 15 of the MSMED Act, 2006 (15 days if no agreement; maximum 45 days if written agreement exists). Overdue interest under Section 16 is mandatory at 3 times RBI Bank Rate and expressly non-deductible under Section 23.
Under Section 16 of the MSMED Act, 2006, delayed payments to Micro and Small enterprises carry compound interest at three times the RBI Bank Rate compounded with monthly rests. Under Section 23, this interest is never tax-deductible. Under Section 43B(h) of the Income Tax Act, 1961, any unpaid principal at year-end is disallowed from business expenditure and taxed at corporate rates.
Statutory Slabs & Rate Matrix
How to Use the MSME 45-Day Payment & Section 43B(h) Penal Interest Calculator in 4 Easy Steps
Select MSME Supplier Classification
Choose Micro, Small, Medium, or Trader to verify Section 43B(h) statutory applicability.
Input Invoice & Agreement Details
Enter invoice date, invoice amount, and specify whether a written agreement exists (15 vs 45 days).
Specify Payment Date & Tax Rate
Input the actual payment date or balance sheet date to calculate overdue days, penal interest, and disallowance.
Copy Form 3CD Audit Note
Click 'Copy Form 3CD Audit Note' for seamless insertion into Tax Audit reports.
Key Highlights & Capabilities
Frequently Asked Questions (FAQs)
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