The 45-day payment rule for MSMEs, and why it rarely gets you paid

If you are registered as a micro or small enterprise, your buyer has to pay you within 45 days. That is Section 15 of the MSMED Act, 2006. If they do not, they owe you compound interest at three times the RBI bank rate, monthly rests, and that interest is not deductible for them under income tax.

Most distributors know this. Almost none of them get paid faster because of it.

This page is about why, and about the one change that has actually moved money.

What the law says, precisely

Section 15 sets the outer limit. The payment is due on whichever comes first:

• the date agreed in writing between you and the buyer, or
• 45 days from the day the goods were accepted or deemed accepted.

Two things trip people up here.

An agreement cannot extend past 45 days. If your terms say 90 days, the law caps it at 45 regardless. A longer credit period written into a purchase order does not survive Section 15.

"Deemed accepted" starts the clock. If the buyer does not object in writing within fifteen days of delivery, the goods are deemed accepted on the delivery date. So the clock usually starts the day the truck unloads, not the day someone in their office gets round to approving the bill.

Section 16 then sets the interest: compound, monthly rests, at three times the bank rate notified by RBI. You do not have to ask for it and you do not have to have mentioned it on the invoice. It accrues by statute.

Why the interest almost never gets collected

Because claiming it means telling a customer you intend to sue them, and most distributors would rather have next month's order.

That is not weakness, it is arithmetic. A retailer who owes you ₹80,000 and buys ₹40,000 a month from you is worth more as a customer than as a defendant. The interest clause is real, and it is also a relationship-ending move for a relationship you are trying to keep.

There is a formal route — the MSME Samadhaan portal, which refers the matter to a Micro and Small Enterprise Facilitation Council. It works, slowly, and it is genuinely useful for a buyer you have already written off. It is not a monthly collections tool.

The change that did move money: Section 43B(h)

The Finance Act 2023 inserted clause (h) into Section 43B of the Income Tax Act. In plain terms:

A buyer cannot claim a deduction for what they owe a micro or small enterprise until they have actually paid it, unless it is paid within the MSMED Act time limit.

This flipped the incentive. Before, delaying your payment cost the buyer nothing until you fought them. Now, if the amount is still outstanding at the end of the financial year and was paid late, their taxable profit goes up by that amount in that year.

Two practical consequences:

Your buyer's accountant now cares about your registration status. Expect to be asked for your Udyam number, especially in the weeks before year end. Give it — it is what makes the clause bite.

March gets busy. Buyers who never paid on time suddenly clear old bills before 31 March. If you are going to chase anything, chase it in February.

The clause only covers micro and small enterprises, not medium ones, and only suppliers of goods or services who are registered under the MSMED Act. If you are not registered on Udyam, none of this applies to you at all.

What actually works, in order

1. Know the number before you can be told it. Reading a receivables ageing report is the whole of this step. The single most common failure is not knowing who owes what and since when. If a retailer says "I paid that one", you need to be able to say which invoice, which date, and what is still open — in the same conversation, not after an evening with a ledger.

2. Send a statement, not a reminder. A message saying "please pay" is easy to ignore. A one-page statement showing every invoice, every payment received, and the balance is hard to argue with, and it very often turns up a payment they made that you never recorded.

3. Chase the ones that are slipping, not the ones that are largest. A ₹2 lakh balance from someone who always pays at day 40 is not the problem. A ₹30,000 balance from someone who used to pay at day 20 and now pays at day 55 is the problem, because it is a trend and it will get worse.

4. Put the terms on the invoice. "Payment due within 45 days as per MSMED Act, 2006" costs nothing and removes the "we never agreed that" conversation.

5. Register on Udyam if you have not. It is free, it takes minutes, and without it Section 43B(h) does not apply to your money.

The part nobody tells you

The reason most distributors cannot do step one is not laziness. It is that the data is not there.

Receivables ageing only exists if every sale, every payment and every credit note has been recorded, and recording them means someone typing at the end of a day that started at seven in the morning. So the ledger is three weeks behind, the ageing is guesswork, and the conversation with the retailer is conducted from memory.

The law is not what is failing you. The bookkeeping is.

Where Dhela fits

Dhela reads supplier bills from a photo so the purchase side stops being typed, and records sales, payments and returns as they happen so the receivable side is real. Then it can answer the questions that matter on a Tuesday afternoon: who owes you, how long it has been, who has started paying slower than they used to, and here is a statement you can send them.

It does not chase anybody for you, and it will not sue anyone. It makes sure that when you pick up the phone, you know the number.

Free plan, no card. dhela.in

This is general information, not legal or tax advice. Rates and thresholds change — check the current position before relying on any figure here.