MSME Delayed Payment Interest Calculator
Under Section 16 of the MSMED Act, 2006, a buyer who pays a registered micro or small supplier after the due date (max 45 days) must pay compound interest with monthly rests at 3× the RBI bank rate. Enter your invoice details below to see exactly how much interest your buyer owes you.
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How the MSME interest is calculated
- Find the due date. It is the date agreed in writing, but never more than 45 days from acceptance. With no written agreement, it is 15 days (Section 15).
- Find the interest rate. 3 × the bank rate notified by RBI. With a bank rate of 5.50%, that is 16.5% a year.
- Compound monthly from the due date until the day the payment is received (Section 16).
Frequently asked questions
Who can claim interest under Section 16 of the MSMED Act?
Micro and small enterprises registered on the Udyam portal can claim it from any buyer who pays late. Medium enterprises and unregistered suppliers cannot claim this statutory interest.
What is the maximum credit period allowed for MSME payments?
45 days from the day of acceptance of goods or services. Even if your agreement says 60 or 90 days, the law caps it at 45 days.
What is Section 43B(h) of the Income Tax Act?
From FY 2023-24, a buyer can claim payments owed to micro and small suppliers as a business expense only in the year they are actually paid within the MSMED Act time limit. Late payments are added back to the buyer’s taxable income, which gives MSMEs strong leverage when following up.
Can the buyer deduct this interest from their taxes?
No. Section 23 of the MSMED Act says interest paid under Section 16 is not an allowable deduction for the buyer.
How do I recover the amount and interest?
Start with polite reminders, then a formal demand notice. If it is still unpaid, file a case with the MSME Facilitation Council through the MSME Samadhaan portal (Section 18).
This calculator gives an estimate for awareness only and is not legal or tax advice.