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 — cannot exceed 45 days for registered MSMEs regardless of any written agreement.
Interest = 3 Bank Rate (currently 6.75% = 20.25% annual). Interest is compounded monthly on overdue amount from day 46 onwards.
If payment is not made within 45 days, the buyer cannot claim it as a business expense for income tax until payment is made.
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.
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 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