Section 43B(h) · Disallowance of payments to MSMEs beyond statutory time-limit
Pay your MSME supplier on time — or lose the deduction.
- Applies to
- Micro & Small (not Medium)
- With written agreement
- 45 days
- Without agreement
- 15 days
- Effective from
- AY 2024-25
In plain English
If you buy from a Micro or Small enterprise, you have to clear the bill in 45 days (15 days when there's no written agreement) — otherwise that expense is not allowed as a deduction this year. You only get to claim it in the year you actually pay. Medium enterprises are not covered.
| Meaning | Number |
|---|---|
| With written agreement | 45 days |
| Without agreement | 15 days |
What this section covers
Clause (h), inserted in Section 43B by the Finance Act, 2023 with effect from AY 2024-25, deals with amounts payable by an assessee to a Micro or Small enterprise (Medium enterprises are NOT covered) for goods supplied or services rendered. The deduction is allowed only when the amount is actually paid, and the proviso permitting payment by the due date of return does NOT apply to clause (h). Payment must therefore be made within the time-limit u/s 15 of the MSMED Act — 45 days where a written agreement specifies a credit period (max 45), and 15 days where there is no written agreement.
Read the legal text
“Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable… in respect of— … (h) any sum payable by the assessee to a micro or small enterprise beyond the time limit specified in section 15 of the Micro, Small and Medium Enterprises Development Act, 2006, shall be allowed… only in computing the income… of that previous year in which such sum is actually paid by him…”
Old Act vs New Act
| Aspect | Act, 1961 | Act, 2025 |
|---|---|---|
| Section | 43B(h) | 37(2)(g) |
| Topic | Disallowance of payments to MSMEs beyond statutory time-limit | |
| Verdict | Mapped to Section 37(2)(g) — reviewed | |
| Notes | The Income Tax Department's official MSME guide maps old Section 43B(h) to Section 37(2)(g) of the Income-tax Act, 2025. The detailed MSMED Act payment-timing mechanics were not re-reviewed in this pass. | |
Common confusion
Clause (h) does NOT apply to Medium enterprises — only Micro and Small. The buyer must verify the supplier's Udyam status as on the date of supply, not on the date of payment.
Who should know this
Related sections
Based on the official Income-tax Act, 1961 and the published Income-tax Act, 2025 as available on the Income Tax Department website. Always verify against the published Act and consult a qualified professional.
What was checked
43B(h) → 37(2)(g): Mapping of the MSME delayed-payment deduction rule to s.37(2)(g); detailed MSMED Act timing mechanics not re-checked in this pass. MSME Tax benefits & incentives — official Income Tax Department guide