Tax & Compliance Calculator
MSME 45-Day Payment & Penal Interest Calculator
Check statutory credit limits (15 or 45 days), Income Tax Section 43B(h) disallowance risks, and Section 16 monthly compound penal interest for invoices from Micro and Small enterprises.
Invoice & Supplier Information
Defaults to invoice date. MSME Act allows 15 days from delivery for objection.
Credit Terms & Payment Status
Statutory cap under Section 15 is 45 days.
Payment Date & Analysis Date
Statutory Settings (Optional)
Current RBI Bank Rate is 6.50% (MSME interest is 3× = 19.50%).
Used to estimate immediate cash flow tax penalty if disallowed.
At Risk (Overdue – Pay Before 31 March to Avoid Disallowance)
Section 43B(h) Income Tax Assessment
- Statutory Due Date
- 3 Nov 2026
- Permissible Credit Limit
- 45 days (statutory cap)
- Days Overdue
- 5 days overdue
- Deduction Allowable In
- FY 2026-27
MSMED Act Section 16 Penal Interest
- Section 16 Penal Rate
- 19.5% p.a.
- Invoice Principal
- ₹5,00,000.00
- Total Amount Payable
- ₹5,01,335.62
Interest compounded monthly at 3× RBI Bank Rate (19.5% p.a.)
Section 16 Monthly Compounding Schedule
| Month | Days | Opening Principal (₹) | Monthly Interest (₹) | Closing Balance (₹) |
|---|---|---|---|---|
| Nov 2026 | 5 | ₹5,00,000.00 | +₹1,335.62 | ₹5,01,335.62 |
Formula and assumptions
- Under Section 15 of MSMED Act 2006, payment must be made within 15 days if there is no written agreement, or within the agreed period capped at a statutory maximum of 45 days.
- Section 43B(h) of the Income-tax Act, 1961 applies exclusively to registered Micro and Small enterprises. Medium enterprises and Wholesale/Retail Traders (NIC 45/46/47 per MSME Office Memorandum) are exempt.
- Under Section 16 of MSMED Act 2006, overdue payments incur mandatory compound penal interest at three times the RBI Bank Rate with monthly rests from the day following the due date.
- Under Section 23 of MSMED Act 2006, penal interest paid or payable to MSMEs cannot be claimed as a tax-deductible business expense.
- Amounts are rounded to 2 decimal places (half up) using exact Decimal.js math.
Formula version 1.0. Reviewed against Finance Act 2023 & MSMED Act 2006, 7 November 2026.
Frequently asked questions
Does Section 43B(h) apply to Medium enterprises?
No. Section 43B(h) strictly applies only to payments due to registered Micro and Small enterprises. Medium enterprises (investment up to ₹50 Cr, turnover up to ₹250 Cr) are excluded from the scope of Section 43B(h) and MSMED Chapter V recovery provisions.
Are Wholesale and Retail Traders covered under Section 43B(h)?
No. Under Office Memorandum No. 5/2(2)/2021-E/P & G/Policy issued by the Ministry of MSME, registration of Wholesale and Retail Traders on Udyam (NIC codes 45, 46, and 47) is valid solely for Priority Sector Lending (PSL) benefits. Chapter V of the MSMED Act (Sections 15-23) and Section 43B(h) do not apply to purchases from traders.
Can buyer and supplier agree to 60 or 90 days credit in a contract?
A buyer and supplier may write longer credit terms into their contract, but Section 15 of the MSMED Act strictly caps the legal credit period at 45 days. Any contractual term exceeding 45 days is void for statutory due date calculations under Section 43B(h).
What happens if payment is made late, but before 31 March of the same financial year?
If payment is made after the 15 or 45-day due date but on or before 31 March of the same financial year, the expense is NOT disallowed under Section 43B(h) because actual payment was completed within that FY. However, mandatory compound penal interest under Section 16 of the MSMED Act is payable to the supplier for the overdue days, and this interest cannot be claimed as a tax deduction.
Can a buyer claim MSME penal interest as a tax-deductible expense?
No. Section 23 of the MSMED Act, 2006 explicitly states that interest paid or payable to MSMEs under Section 16 is not allowed as a deduction in computing income under the Income-tax Act, 1961.
Does Section 43B(h) apply to businesses declaring income under presumptive taxation (Section 44AD / 44ADA)?
No. Sections 44AD and 44ADA start with a non-obstante clause overriding Sections 28 to 43C of the Income-tax Act. Eligible businesses and professionals declaring income under presumptive taxation are not subject to Section 43B(h) disallowances.