MSME 45-day rule
MSME 45-day payment rule: track every pay-by date
Under the MSMED Act, a buyer must pay a micro or small supplier within the agreed period, which can be at most 45 days from acceptance of the goods, or within 15 days if there is no written agreement. SmartWorker shows an MSME pay-by date (never more than 45 days) on purchase orders from suppliers you mark as MSME, and on your own invoices if your company is an MSME, so nobody has to count days by hand.
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01In detail
The rule in plain words
The Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) protects small suppliers from long credit. Section 15 says the buyer must pay:
- within the period agreed in writing, and that period cannot be more than 45 days from the day the goods or services are accepted, or
- within 15 days of acceptance, if there is no written agreement.
If the buyer pays late, section 16 makes the buyer liable to pay interest at three times the bank rate notified by the Reserve Bank of India, with monthly compounding.
Why manufacturers suddenly care: section 43B(h)
From the financial year 2023-24, section 43B(h) of the Income Tax Act links this rule to your tax. If you owe money to a micro or small enterprise and do not pay within the MSMED Act limit, you can claim that expense only in the year you actually pay. For example, a Rs 10 lakh bill from a small supplier, paid late after 31 March can push Rs 10 lakh of expense into next year, and raise this year’s tax. Check with your CA how this applies to your accounts.
So the rule now matters on both sides of a factory:
- As a buyer, you must know which supplier bills fall due when, and pay them on time.
- As a supplier, if you are a micro or small enterprise, your customers have a strong reason to pay you on time, and a clear date to pay by.
Where SmartWorker helps
Counting 15 or 45 days on every bill by hand is where mistakes happen. In SmartWorker you mark a supplier as MSME and every purchase order from it shows its pay-by date. You enter the agreed days; with no written agreement the law gives 15 days, so enter 15. Customer invoices are followed up with automatic WhatsApp and e-mail reminders, and paid or cancelled invoices never get a reminder. The owner’s overview shows money to receive, overdue amounts and money to pay, and the reports can be seen by financial year or quarter.
From 1 April 2026 the Income-tax Act, 2025 applies. The same rule is now section 37(2)(g); in the 1961 Act it was section 43B(h). Check how it applies to you with your CA.
02How it works
Three steps.
- 1
Mark the MSME supplier
On the supplier, tick MSME and enter the Udyam number. If your own company is a micro or small enterprise, an admin can switch on MSME in Settings and enter the Udyam number and the agreed days (1 to 45).
- 2
See the date on each document
A purchase order from an MSME supplier shows 'MSME: pay by', counted from the goods receipt or delivery date plus the supplier's payment days, never more than 45. On your own invoices (if you are an MSME) it is counted from the invoice date.
- 3
Follow up before it passes
Automatic WhatsApp and e-mail reminders go to customers who owe you, and the owner's overview shows money to pay, so dues to MSME suppliers are not forgotten.
Questions
Is it 15 days or 45 days?
If there is no written agreement on payment terms, the limit is 15 days from the day the goods or services are accepted (or deemed accepted). With a written agreement, you may agree a longer period, but not more than 45 days. Check the exact position with your CA.
What is section 43B(h)?
It is a rule in the Income Tax Act, in force from the financial year 2023-24. If a business pays a micro or small enterprise later than the MSMED Act allows, it can claim that expense only in the year it actually pays. A late payment can therefore raise the buyer's tax for the year. Check with your CA how it applies to you. From 1 April 2026 the Income-tax Act, 2025 applies. The same rule is now section 37(2)(g); in the 1961 Act it was section 43B(h). Check how it applies to you with your CA.
Does it apply to every supplier?
No. It applies to payments due to micro and small enterprises registered under Udyam, not to medium enterprises. Retail and wholesale traders who registered on Udyam only to get bank-loan benefits are outside section 15 (Ministry of MSME office memo, 28 June 2024). Your CA can confirm which of your suppliers are covered.
What if my customer pays me late?
If you are a micro or small enterprise, the MSMED Act allows you to claim interest on late payment at three times the bank rate notified by the RBI, compounded monthly. If your company is marked MSME, SmartWorker shows the pay-by date on each of your invoices, and the invoice is followed up with automatic reminders.
Does SmartWorker file anything with the government?
No. SmartWorker shows pay-by dates and follows up payments. It does not file returns or MSME forms for you.
See it on your own invoices and orders.
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