MSME Payment & §43B(h) Interest Calculator
Enter one supplier invoice and see the MSMED payment deadline, whether you're late, your §43B(h) income-tax disallowance risk, and the delayed-payment interest you owe — in seconds.
Track all your MSME payables automatically
Sahayak watches every MSME invoice, counts the 15/45-day clock for you, and warns you before §43B(h) bites. Get a free walkthrough + updates.
What is Section 43B(h)?
Section 43B(h) of the Income-tax Act, inserted by the Finance Act 2023 and applicable from AY 2024-25 (financial year 2023-24 onwards), says that any amount a business owes to a Micro or Small enterprise supplier is deductible only in the year it is actually paid — unless it is paid within the time limit set by the MSMED Act, 2006. If you do not pay your Micro/Small supplier within that limit and the amount is still outstanding at the end of your financial year, the expense is disallowed: it is added back to your taxable income for that year and you pay tax on it, getting the deduction only in the later year when you finally pay.
Why it matters
The MSMED Act, 2006 fixes the payment limit at 15 days where there is no written agreement, or the period agreed in writing (capped at 45 days) where there is one. Miss it and two things bite at once: (1) under §43B(h) the unpaid expense is disallowed at year-end, increasing your taxable income; and (2) under §16 of the MSMED Act you owe the supplier compound interest, with monthly rests, at three times the RBI bank rate — and that interest is itself not deductible. The rule applies only to Micro and Small suppliers; Medium enterprises are outside it. Knowing your exact deadline per invoice is the only way to stay out of both traps.
Frequently asked questions
What is the payment time limit under Section 43B(h)?
It is the MSMED Act limit: 15 days from acceptance (or deemed acceptance) of goods/services where there is no written agreement, or the period agreed in writing — capped at 45 days — where there is one.
Does Section 43B(h) apply to all MSME suppliers?
No. It applies only to Micro and Small enterprises. Payments to Medium enterprises, and to suppliers who are not registered MSMEs, are outside §43B(h) and the MSMED delayed-payment interest.
What happens if I pay my MSME supplier late but within the same year?
If you pay after the limit but before your financial year ends, there is no §43B(h) disallowance (the expense is paid in the accrual year). However, you still owe MSMED §16 delayed-payment interest for the period of delay.
How is the MSMED delayed-payment interest calculated?
Under §16 of the MSMED Act it is compound interest, with monthly rests, at three times the bank rate notified by the Reserve Bank of India, running from the day after the payment limit. This interest is not allowed as a deduction under §23 of the MSMED Act.
Is the disallowed amount lost forever?
No — the §43B(h) disallowance is a timing difference. The expense becomes deductible in the financial year you actually pay the supplier. But you carry the extra tax in the year of disallowance, and the MSMED interest is a real additional cost.
This is an estimate to illustrate how Section 43B(h) and the MSMED Act work — not tax advice. The MSMED interest uses an assumed RBI bank rate and simplified monthly compounding; actual figures depend on the exact bank rate in force and your facts. Confirm with your CA before filing.