MSME 45-Day Payment & Interest Calculator
Work out when an MSME payment was actually due and the compound interest a buyer owes under Section 16 of the MSMED Act. Useful whether you are chasing a payment or checking your own exposure.
Interest is 3× the RBI bank rate, compounded monthly — adjust the rate to the current one
Agreed credit periods are capped at 45 days however long the contract says.
Interest is three times this rate. Check the current bank rate on the RBI website.
Interest payable
₹81,953
at 16.5% a year, compounded monthly
45 days from acceptance
Compounded over 5 whole months plus 23 days pro-rata.
Why this rule has teeth
Late payment to small suppliers has long been a structural problem in Indian business. The MSMED Act responds with two mechanisms: a statutory payment deadline that cannot be contracted around, and a punitive interest rate that makes delay expensive rather than free.
The interest is three times the RBI bank rate, compounded monthly. At current rates that is around 16.5% a year with monthly compounding — meaningfully more than what a buyer would pay to borrow the same money, which removes the incentive to use suppliers as a source of working capital.
When the clock starts
The period runs from the day of acceptance, not the invoice date. Acceptance normally means delivery of the goods or services. If the buyer raises a written objection within fifteen days, acceptance is deferred until that objection is resolved. Getting this date right matters, because it moves the due date and therefore the interest.
The 45-day ceiling is a ceiling
Parties may agree a shorter period, but not a longer one. A contract specifying 90-day terms does not override the statute — payment is still due on day 45, and interest runs from day 46. Where there is no written agreement at all, the period shortens to 15 days.
The tax consequence for buyers
Section 43B(h) of the Income Tax Act denies a buyer any deduction for amounts owed to micro and small enterprises that remain unpaid past the statutory period. The expense moves to the year of actual payment, inflating taxable profit in the year it was incurred. For many buyers this has proved a stronger motivator than the interest itself.
Who is covered
Only micro and small enterprises registered on Udyam at the time of supply. Medium enterprises are excluded, and so is an unregistered supplier — so if you qualify, registering is what turns this from a principle into an enforceable right.
Frequently asked questions
- What is the MSME 45-day payment rule?
- Under Section 15 of the MSMED Act, a buyer must pay a registered micro or small enterprise by the agreed date, and that date cannot be later than 45 days from the day the goods or services were accepted. Where there is no written agreement, the period is 15 days.
- How much interest is payable on a late payment?
- Section 16 sets it at three times the bank rate notified by the RBI, compounded with monthly rests. With the bank rate at 5.5%, that is 16.5% a year compounding monthly — considerably more than commercial borrowing, which is the point.
- Can the buyer and supplier agree to waive the interest?
- No. The liability arises by statute and cannot be contracted out of. An agreement stating a 90-day credit period does not extend the statutory 45-day limit either — the excess is simply unenforceable, and interest runs from day 46.
- What is Section 43B(h) and how does it relate?
- It is an income tax provision that disallows a buyer's deduction for any amount owed to a micro or small enterprise that remains unpaid beyond the statutory period. The expense can only be claimed in the year it is actually paid, which pushes up the buyer's taxable profit — a strong commercial incentive to pay on time.
- Does this apply to medium enterprises?
- No. The delayed payment provisions apply to micro and small enterprises only. Medium enterprises are outside them, as are suppliers who are not registered on Udyam at the time of supply.
- What can I do if a buyer will not pay?
- File a reference with the Micro and Small Enterprise Facilitation Council in your state, which can be done online through MSME Samadhaan. The Council attempts conciliation and can then arbitrate. A buyer wishing to appeal the award must deposit 75% of it first.
- When does the clock actually start?
- From the day of acceptance — meaning actual delivery or, where the buyer raises a written objection within 15 days, the day the objection is resolved. It does not run from the invoice date, which is a common misunderstanding.
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Chasing payments you should not have to chase
The interest is only useful if you know exactly which invoices are overdue and by how many days. Smart Dhandha tracks invoice dates, due dates and receipts, so overdue accounts surface on their own instead of when you go looking.
- Due dates and ageing tracked per invoice
- Payment receipts matched against invoices
- Overdue accounts visible without a spreadsheet
This tool is provided free for general guidance and uses the rates noted above. Statutory rates change, and individual circumstances differ — please confirm with your accountant or a qualified professional before relying on these figures for filing or payroll.