Last updated: 17 September 2026
Quick Answer: Under the MSME 45-day payment rule, buyers must pay registered micro and small suppliers within 15 days, or up to 45 days by written agreement. Days run from acceptance. You're owed the bill plus compound interest at three times the RBI bank rate; Section 43B(h) only blocks the buyer's tax deduction until they pay.
The MSME payment rule and Section 43B(h) are related but do different things. Sections 15 and 16 of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 set your deadline and interest, for services as well as goods; the Income-tax Act decides the buyer's tax deduction. Your Udyam registration must be dated before the invoice.
Overview
| Point | What the law says |
|---|---|
| Payment deadline | 15 days from acceptance with no written agreement; the agreed date if written, capped at 45 days |
| Who's protected | Micro and small enterprises registered on Udyam before the invoice date |
| Interest on late payment | Compound, added monthly, at three times the RBI bank rate |
| Buyer's tax effect | No deduction until paid: Section 43B(h) (1961 Act), Section 37(2)(g) (2025 Act) |
| Where to claim | MSME Online Dispute Resolution (ODR) Portal, heard by your state council |
Is the MSME payment rule 15 days or 45 days?
It's 15 days, unless you and the buyer agreed a payment date in writing. A written date applies instead, but section 15 of the MSMED Act, 2006 caps it at 45 days, so a "60 days" clause still means 45.
| Your situation | The buyer must pay |
|---|---|
| No written agreement on payment | Within 15 days of acceptance |
| Written agreement of 45 days or less | By the agreed date |
| Written agreement of more than 45 days | By day 45 after acceptance |
Acceptance is normally the day you deliver the goods or finish the service. If the buyer objects in writing within 15 days, the clock starts when you resolve the objection.
What are you owed if a buyer pays late?
You're owed the unpaid amount plus compound interest, added every month, at three times the bank rate notified by the Reserve Bank of India (RBI), under section 16. Interest runs from the day after the deadline, whatever your contract says, and Section 43B(h) adds nothing to what you're paid.
The RBI bank rate was 5.50% on 17 September 2026, which makes the rate 16.5% a year, or 1.375% a month compounded. Check the current rate on the RBI website before you work out a claim.
Worked example: you supply goods worth ₹1,00,000 with no written credit period, so payment is due within 15 days of acceptance. If the bank rate stays at 5.50%, the buyer owes this interest on top of the bill:
| Paid this long after the deadline | Interest you're owed |
|---|---|
| 1 month | ₹1,375 |
| 3 months | ₹4,182 |
| 6 months | ₹8,539 |
| 12 months | ₹17,807 |
What does Section 43B(h) change for a buyer who pays you late?
It changes the buyer's tax, not your payment. A buyer who pays you after the section 15 deadline can deduct your bill only in the year they actually pay it, so an overdue invoice still unpaid on 31 March costs them that year's deduction. That makes March a good time to chase payment.
- Income-tax Act, 1961: Section 43B(h) applies from assessment year 2024-25 (income of 2023-24) to income of 2025-26.
- Income-tax Act, 2025: the same rule sits in section 37(2)(g) of the Income-tax Act, 2025 for income from 2026-27.
- No grace period: paying before the tax return due date doesn't restore the deduction.
Does the 45-day payment rule cover your business?
It covers you if you're a micro or small manufacturer or service provider registered on Udyam. Not sure of your class? Check the current micro and small enterprise limits.
| Your business | Covered? |
|---|---|
| Micro or small manufacturer or service provider on Udyam | Yes |
| Medium enterprise | No |
| Retail or wholesale trader on Udyam | No |
| Buyer is a business of any size, or a government department | Yes |
| Buyer is an overseas company | No |
Traders have been able to register on Udyam since 2 July 2021, but only for priority sector lending. The Ministry of MSME says units registered for trading (NIC activity codes 45, 46 and 47 on the certificate) aren't eligible for the delayed payment provisions.
Do you need Udyam registration before you raise the invoice?
Yes. The MSME Samadhaan delayed payment FAQ says your registration must be dated before the disputed invoice, because the benefit can't be claimed retrospectively. If you aren't registered yet, register now so your next invoices are protected.
Registration on the official Udyam Registration portal is free, so you don't need to pay an agent. It uses your Aadhaar, PAN and GSTIN if you have one. If you'd like help, Jaagruk Bharat's assisted Udyam registration files it with you on that portal.
How do you claim a delayed MSME payment?
You file a delayed payment application online, and your state's Micro and Small Enterprises Facilitation Council (MSEFC) decides it under section 18. New applications now go through the Ministry of MSME's ODR Portal, as the Samadhaan portal notes.
- Remind the buyer in writing, quoting the invoice, the due date and sections 15 and 16. A legal notice isn't needed before you file.
- Keep your Udyam certificate, invoices and purchase order ready, or an affidavit if the order was oral. Check your registration date by verifying your Udyam certificate online.
- File the application on the MSME ODR Portal. Pick the council of the state where your office or unit is, as listed on Udyam, even if the buyer is elsewhere in India.
- Expect conciliation first, then arbitration if that fails. The council must decide within 90 days of the reference.
If the buyer wants a court to set aside the council's award, they must first deposit 75% of the amount, under section 19. For more Udyam and scheme help, browse these MSME guides and resources.
