The extension gives businesses three extra weeks, but the MSME part of the audit takes time. Every invoice from a micro or small supplier has to be matched to its payment date. Here’s what to check, in order.

The dates that matter this month

The extension was announced by CBDT in late September 2026 (India Briefing). Transfer-pricing cases follow separate timelines, so check those with your CA.

Why MSME payables need attention now

Two rules connect your supplier payments to your tax audit:

• Section 43B(h): an amount owed to a micro or small enterprise, paid after the MSMED Act deadline (15 days, or up to 45 days with a written agreement), is deductible only in the year it is actually paid. Read our 43B(h) guide.
• Section 23 of the MSMED Act: interest payable to MSEs for late payment isn’t an allowable deduction.

Since Notification 23/2025, Clause 22 of Form 3CD asks for details of amounts due to MSEs, when they were paid, amounts paid beyond the Section 15 limit, and the resulting 43B(h) disallowance (Figment Global). AY 2026-27 is the second year of this format.

The 7-step MSME check before 21 October

1. Build the MSE supplier list. Verify each supplier’s Udyam status and category as on the relevant date. Medium enterprises, and generally traders, are outside the rule.
2. Record the agreed credit terms for each supplier. With no written agreement, the limit is 15 days.
3. Use the date of acceptance, not just the invoice date, to start the clock.
4. Match payments to invoices one by one. Classify each as paid on time, paid late in the same year, paid late in the next year, or unpaid at 31 March 2026.
5. Compute the 43B(h) disallowance for amounts unpaid and overdue at year-end. Claim last year’s disallowed amounts that you paid this year.
6. Recompute Section 23 interest (3x the RBI bank rate, compounded monthly) and add it back.
7. Reconcile Clause 22 with MSME Form I, the MSE disclosure in your financial statements, and Clause 26, so the same amount isn’t reported twice.

What changes from next year

From tax year 2026-27, the Income-tax Act, 2025 applies. The 43B(h) rule continues as Section 37(2)(g), and the audit report moves to a new form under the new Act. The substance doesn’t change: pay micro and small suppliers on time and the deduction stays in the same year.

If you’re the supplier

This is a good month to send your buyers a polite note with your Udyam certificate. Their auditors are checking MSE payables right now, so a reminder from you is timely and welcome. See the 45-day rule explained.