Calculate interest penalty on delayed payments to Micro, Small & Medium Enterprises under MSME Act 2006.
Section 15 of MSME Development Act, 2006: Buyers must pay MSMEs within 45 days from invoice date. Late payment attracts compound interest at 3× the bank rate. From April 2024, unpaid amounts are also non-deductible expenses for tax purposes.
From invoice date, buyer has 45 days to pay. This is mandatory unless written agreement specifies otherwise (but cannot exceed 45 days for MSMEs).
Interest = 3× Bank Rate (currently 6.75% = 20.25% annual). Interest is compounded monthly on overdue amount.
If payment is not made within 45 days, the buyer cannot claim it as a business expense for income tax until payment is made. This applies to purchases from MSMEs only.
Micro: Investment < ₹1 Cr, Turnover < ₹5 Cr
Small: Investment < ₹10 Cr, Turnover < ₹50 Cr
Medium: Investment < ₹50 Cr, Turnover < ₹250 Cr
Must have valid Udyam Registration.
No. MSME Act mandates 45 days maximum. Any agreement for longer terms is void for registered MSMEs. Only exception: Buyer can pay earlier.
Buyer must raise dispute within 15 days of invoice receipt. If no dispute raised, 45-day clock starts ticking. MSME can file complaint with MSME Samadhaan portal.
MSME can file complaint on msmesamadhaan.gov.in portal. MSEFC (Micro & Small Enterprises Facilitation Council) will resolve within 90 days. No court fees required.
✅ Always mention "Payment due within 45 days as per MSME Act" on invoices
✅ Get Udyam Registration (free on udyamregistration.gov.in)
✅ Send payment reminder on Day 30
✅ Send legal notice on Day 46 if unpaid
✅ File complaint on Day 60 if still unpaid
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