Section 43B(h): The MSME 45-Day Payment Rule and How to Stay Compliant
Section 43B(h) of the Income-tax law allows a deduction for amounts payable to micro and small enterprises only in the year you actually pay — if you pay beyond the time limit permitted by the MSMED Act, 2006.
The time limit
- 15 days where there is no written agreement.
- Up to 45 days where there is a written agreement fixing the credit period.
Pay a micro/small supplier late and the expense can be disallowed in that year (added back to your income), only becoming deductible in the year of actual payment — a real cash-flow and tax cost.
How to stay compliant
- Identify which suppliers are Udyam-registered micro/small enterprises.
- Track each such bill's due date (15 or 45 days) and pay within it.
- Keep books that flag overdue MSME dues before year-end.
Rules change often and how they apply depends on your exact numbers and facts. Don't guess on Section 43B(h) MSME payment compliance — get a qualified professional to review your case.
💬 Talk to a KyaTax expert →Frequently asked questions
Does 43B(h) apply to medium enterprises?
No — it applies to micro and small enterprises. Medium enterprises are outside this specific disallowance. Confirm your supplier's category from their Udyam registration.
Is it 15 days or 45 days?
15 days without a written agreement; up to 45 days with one. The clock and terms matter — keep documentation.
What if I already paid late last year?
The deduction typically shifts to the year of actual payment. The exact treatment depends on facts — get a professional to review before filing.
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