How to use Section 43B(h) to get paid in 45 days (MSME protection)

Effective 1 April 2024, Section 43B(h) of the Income Tax Act says: if you buy from a registered Micro or Small enterprise and don't pay within 45 days, you can't deduct that purchase for tax. This is the biggest cash-flow weapon Indian SMBs ever received. Here is how to use it.

Step 1: Register on Udyam to qualify

Section 43B(h) protects only Micro AND Small enterprises (not Medium). Register on udyamregistration.gov.in first. The classification slab matters — confirm you are Micro or Small.

Step 2: Mention 'MSE registered under Udyam' on every invoice

Add the line: 'This is an MSE registered under Udyam Registration. As per Section 15 of MSMED Act read with Section 43B(h) of IT Act, payment is due within 45 days of acceptance.' Print your Udyam URN.

Step 3: Track due dates strictly

If buyer agreed to a credit period in writing (sales contract or PO) → that period applies (max 45 days). If no agreement → 15 days from supply. Day 1 = day of acceptance / deemed acceptance.

Step 4: Charge MSMED interest after due date

MSMED Act Section 16 mandates compound interest at 3x bank rate (currently ~13.5% × 3 = 40.5% per annum) for delayed payments. Issue a Debit Note for the interest amount. This is enforceable in court.

Step 5: Send the polite reminder + the 43B(h) implications

Day 30: friendly WhatsApp + email. Day 40: formal email mentioning 'as per Section 43B(h), if not paid by Day 45, the buyer cannot claim this purchase as a tax-deductible expense in the current FY'. This gets payment most of the time.

Step 6: Escalate to MSME Samadhaan if unpaid past 45 days

File on samadhaan.msme.gov.in. The Micro and Small Enterprises Facilitation Council adjudicates within 90 days. Order is enforceable as a decree of a court. Filing alone often gets payment.

Frequently asked questions