MSME delayed payment rule (45 days): what buyers and sellers must know
Buyers must pay micro and small suppliers within the agreed period, capped at 45 days, or 15 days if none is agreed, or pay compound interest.
Short answer
The MSME delayed payment rule, under sections 15 to 24 of the MSMED Act, 2006, requires buyers to pay micro or small suppliers within the agreed period, which cannot exceed 45 days from acceptance of goods or services, or within 15 days if no period is agreed.
- Law
- MSMED Act, 2006, sections 15 to 24
- Maximum credit period
- 45 days from acceptance
- No agreement
- 15 days
- Interest
- Compound, monthly rests, at 3 times the RBI bank rate
How the rule works
The protection applies to suppliers registered as micro or small enterprises under Udyam, not medium enterprises. The clock starts from the date of acceptance, or deemed acceptance, of the goods or services. If the buyer pays late, it must pay compound interest with monthly rests at three times the bank rate notified by the RBI, and this interest is not deductible as an expense for income tax.
Companies that buy from micro and small enterprises must disclose amounts outstanding beyond 45 days in their financial statements and file a half-yearly return in MSME Form I with the ROC.
Recovery and tax impact
A supplier can file a claim on the MSME Samadhaan portal, which refers it to the Micro and Small Enterprises Facilitation Council of the state. The council attempts conciliation and then arbitration. A buyer who wants to challenge an award in court must first deposit 75% of the amount awarded.
Under section 43B(h) of the 1961 Act, from financial year 2023-24, buyers could deduct payments to micro and small enterprises only if paid within the MSMED Act limit; check the corresponding rule under the Income-tax Act, 2025.
Why it matters for startups
As a supplier, Udyam registration gives you leverage to get paid on time. As a buyer, especially a fast-growing startup with vendor dues piling up, late payments to MSEs mean interest costs, disclosures and possible loss of tax deductions. Tag MSE vendors in your accounting system and build the 45-day limit into payment runs.
Related services
Sources
- MSME Samadhaan delayed payment portal
- India Code: official repository of central Acts
- Udyam Registration portal (Ministry of MSME)
Written by the Refogo Editorial Team from the official sources above and checked on 2026-10-31. Laws, rates and due dates change, and authorities often extend deadlines, so confirm your own case with a qualified professional. This is general information, not legal or tax advice. Read our editorial policy or report an error to support@refogo.com.
Common questions
Does the 45-day rule apply to medium enterprises?
No. The MSMED Act payment protection applies to micro and small enterprises only.
Can the contract allow 60 days for payment to an MSE?
No. The agreed period cannot exceed 45 days from acceptance under section 15.
Where can an MSE file a delayed payment complaint?
On the MSME Samadhaan portal, which routes the case to the state Micro and Small Enterprises Facilitation Council.