MSME 45-day payment rule: what buyers and suppliers must do
Updated
A buyer must pay a registered micro or small enterprise within the agreed credit period, at most 45 days, or within 15 days if nothing is agreed in writing. As of October 2026, a bill paid later is allowed as an expense for income tax only in the year it is paid, and carries compound interest.
The rule in one paragraph
The Micro, Small and Medium Enterprises Development Act, 2006 says a buyer must pay a micro or small supplier by the date agreed in writing, and that date cannot be more than 45 days from acceptance of the goods or services. With no written agreement, payment is due within 15 days. Since the financial year 2023-24, income tax law has added a cost for the buyer: an amount paid later than this is deducted as an expense only in the year it is paid. The rule was section 43B(h) of the Income-tax Act, 1961, and it continues in the Income-tax Act, 2025, which replaced that Act from 1 April 2026. Ask your CA for the present section number when you cite it.
Who is a micro or small enterprise
From 1 April 2025:
| Class | Investment in plant and machinery | Turnover |
|---|---|---|
| Micro | Up to ₹2.5 crore | Up to ₹10 crore |
| Small | Up to ₹25 crore | Up to ₹100 crore |
| Medium (not covered by this rule) | Up to ₹125 crore | Up to ₹500 crore |
The supplier must hold a Udyam registration. The buyer can be any business, of any size.
An example
A workshop buys machined parts worth ₹2,00,000 from a small enterprise on 10 February, on written terms of 30 days. Payment is due by 12 March.
- Paid on 5 March: allowed as an expense for the year, as usual.
- Paid on 20 April: the ₹2,00,000 is not allowed as an expense for the year that ended on 31 March. It is allowed in the next year, when it was paid, and interest is due to the supplier.
If you are the buyer
- Ask every vendor for their Udyam certificate and note whether they are micro, small or medium, and whether they manufacture, provide services or trade.
- Put the agreed credit period in writing, on the purchase order, and keep it at 45 days or less.
- Record each bill with its due date, and look at your payables by age every week.
- Before 31 March, pay every bill from a micro or small enterprise that is past its limit or will cross it.
- If you are a company, report dues to micro and small suppliers that are outstanding for more than 45 days in Form MSME-1, every half year.
If you are the supplier
- Register on the Udyam portal. It is free.
- Print your Udyam number and your credit period on every invoice.
- Send a reminder before the due date, with a payment link.
- Tell slow payers, politely, that late payment costs them their tax deduction for the year. It is usually enough.
How software helps
The rule is about dates, and dates are what get lost in files and phones. In EaseDesk every purchase bill carries its due date, the payables report shows what is due and overdue by vendor, and you pay several bills in one vendor payment. On the sales side, every invoice carries its due date and reminders go out for you. See purchases and how to recover outstanding payments.
Questions
Does the 45-day rule apply to all MSMEs?
No. It protects micro and small enterprises registered on the Udyam portal that manufacture goods or provide services. Medium enterprises are outside it, and so are traders, whose Udyam registration is only for priority sector lending.
From which date are the 45 days counted?
From the day you accept the goods or services, or the day they are deemed accepted. If you raise an objection in writing within 15 days of delivery, the count starts when the supplier removes the objection.
If I pay the bill before filing my income tax return, is the expense allowed?
Only if you paid within the 15 or 45 days. Unlike some other dues, a late payment to a micro or small enterprise is not saved by paying before the return is filed. The expense moves to the year of payment.
What interest is due on a late payment?
Compound interest with monthly rests, at three times the bank rate notified by the Reserve Bank of India, from the day the payment fell due. This interest is itself not allowed as an expense.
I am a small supplier. How do I use this rule?
Register on the Udyam portal, print your Udyam number on every invoice, state your credit period, and remind buyers before the due date. Unpaid dues can be taken to the MSME Samadhaan portal.