Section 43B(h): how MSME suppliers get paid within 45 days
For years, small suppliers waited 90 or 120 days for payment from larger buyers. Section 43B(h) of the Income-tax Act changed the incentive: if a buyer pays a registered micro or small enterprise late, the buyer cannot deduct that expense in the year it was incurred. Here is how to use it.
What the rule says
Introduced by the Finance Act 2023 and effective from FY 2023-24, Section 43B(h) allows a buyer to deduct an amount owed to a micro or small enterprise only in the year it is actually paid — unless it is paid within the time allowed under Section 15 of the MSMED Act:
- Within 15 days of accepting the goods or services, if there is no written agreement on payment terms;
- Within the agreed period, but never more than 45 days, if there is a written agreement.
Who is covered
- Suppliers that are micro or small enterprises registered on Udyam. Medium enterprises are not covered.
- In general, manufacturers and service providers. Traders registered on Udyam are generally treated as outside this rule — check your registration.
- The buyer can be any business claiming the expense as a deduction.
What suppliers should do
- Get Udyam registration if you don’t have it — it is free from the government.
- Print your Udyam number on quotations and invoices, so the buyer knows the rule applies.
- Agree payment terms in writing — and keep them at 45 days or less.
- Use MSME Samadhaan for delayed payments; the MSMED Act also provides for compound interest on late payments.
What buyers should know
Buyers that pay late lose the deduction for that year, which can raise their tax bill. Companies must also report dues to micro and small suppliers outstanding beyond 45 days in the half-yearly MSME-1 form. Many buyers now ask suppliers for Udyam details for exactly this reason.
Key takeaways
- Pay micro and small suppliers within 15 days (no agreement) or the agreed period up to 45 days — or lose the deduction that year.
- Only Udyam-registered micro and small enterprises are covered; medium enterprises are not.
- Suppliers: register on Udyam and show the number on every invoice.
Udyam registration takes 1–2 days with us, from ₹499 + GST — correct classification, certificate, and a map of the benefits you can claim. हिंदी में पढ़ें.
General information, reviewed on 2 October 2026 — not advice for your specific case. Rules change; talk to us before acting.