Section 43B(h) allows a deduction for amounts payable to micro and small enterprises only in the year you actually pay — if you pay beyond the MSMED Act, 2006 limit.
The time limit
- 15 days where there is no written agreement.
- Up to 45 days where a written agreement fixes the credit period.
Pay a micro/small supplier late and the expense can be disallowed that year (added back to income), becoming deductible only when actually paid — a real cash-flow and tax cost.
Stay compliant
- Identify which suppliers are Udyam-registered micro/small enterprises.
- Track each bill's due date (15 or 45 days) and pay within it.
- Keep books that flag overdue MSME dues before year-end.
You buy ₹5,00,000 of material from an Udyam-registered small supplier in Feb 2026, with a written 45-day term, but pay in May 2026 (after year-end 31 March).
| Effect | |
|---|---|
| FY 2025-26 | ₹5,00,000 disallowed → added to taxable profit |
| Extra tax (say 30% slab) | ≈ ₹1,50,000 paid a year early |
| FY 2026-27 | Deduction allowed when paid |
Paying just weeks earlier — before 31 March, within the 45 days — would have avoided the whole timing hit.
This rule quietly punishes good businesses that "pay eventually". Run an MSME-ageing check in March every year and clear micro/small dues before 31 March. KyaTax Books flags these automatically so a payment date never turns into a disallowance.
Not sure how this applies to you?
Rules change and the answer depends on your exact numbers. Get a qualified professional to review Section 43B(h) MSME payment compliance for your case — before you act.
Talk to a KyaTax expert →Frequently asked questions
Does 43B(h) apply to medium enterprises?
No — micro and small only. Confirm your supplier's category from their Udyam registration.
Is it 15 or 45 days?
15 without a written agreement; up to 45 with one. Keep documentation.
I paid late last year — now what?
The deduction typically shifts to the year of payment. Exact treatment depends on facts — get it reviewed before filing.
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