MSME Delayed Payment Interest Calculator with Section 43B(h) Impact
Buyers who pay micro and small suppliers late face two costs: statutory interest at three times the RBI bank rate compounded monthly, and a tax disallowance under section 43B(h) when payment crosses the limit. This tool puts both numbers side by side.
Your numbers
The MSMED Act limits credit to 45 days even when the contract says longer. With no agreement the limit is 15 days.
Enter the bank rate in force. Interest is three times this rate.
Used to estimate tax cost if the deduction is disallowed.
Your results
Interest under the MSMED Act is not an allowable expense and the 43B(h) rules depend on registration status and dates. Confirm with your auditor.
Interest vs days taken to pay
Sweeps Days taken to pay (from acceptance) from 0 to 240, holding your other inputs fixed.
MSME payables watchlist
Want a live list of MSME bills approaching the 45-day limit? Ask for an optional expert review of your payables data.
Optional. The tool and every export work without this. No spam.
How to use it
Enter the unpaid amount, the agreed credit period (the Act caps it at 45 days) and how many days passed from the date of acceptance to payment. Add the current bank rate and your tax rate. Interest is shown for the days beyond the allowed period. The exposure line shows what could be disallowed for tax if the invoice stays unpaid beyond 45 days at year end. Use it on your oldest MSME payables before closing the books.
The method
Interest under section 16 of the MSMED Act is three times the bank rate notified by the RBI, compounded with monthly rests. The tool converts the rate to a monthly rate by dividing by 1200 and raises one plus that rate to the number of overdue months, then subtracts one and multiplies by the principal. Section 43B(h) of the Income-tax Act lets the buyer claim a purchase or service expense only when it is paid within the statutory limit, otherwise in the year of actual payment.
- Applies to supplies from registered micro and small enterprises.
- Verify supplier Udyam registration and its date.
- Interest paid is not deductible, so model it as a pure cost.
ERP and book-keeping notes
Tag every supplier with its Udyam number and enterprise category in the vendor master, and run an ageing report by days from acceptance. In Tally Prime this means a vendor group or UDF, in SAP a vendor classification and a due-date report. Board pay-outs are often batched weekly, so an automated warning at day 35 is cheap and saves both interest and the tax timing cost. Disclose MSME dues in the annual financial statements and the MSME-1 half-yearly return where it applies.
Frequently Asked Questions
When does the clock start?
From the day of acceptance of goods or services, or the deemed acceptance date if there was no objection within 15 days. Use that date, not the invoice date or the date the invoice was booked.
Is the interest deductible?
No. Interest payable to micro and small enterprises under the Act is not allowed as a deduction. That is why the tool shows interest as a plain cost with no tax saving.
Does 43B(h) apply to all suppliers?
It applies to payments to micro and small enterprises as defined in the MSMED Act. Medium enterprises and unregistered suppliers are outside it. Always check the supplier registration status and date.
What bank rate should I use?
Use the RBI bank rate in force during the delay. If the rate changed during the period, calculate each segment separately. The tool uses one rate for simplicity.
Netray can build a read-only ageing report over your payables, joined to vendor Udyam status, that lists MSME bills crossing day 35 and day 45.
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