The 45-day MSME payment rule (Section 43B(h)): what it actually means for you.

Section 43B(h) of the Income Tax Act came into effect from FY 2023-24. It sounds technical. The practical implication is straightforward and significant: if your customers (who are not MSMEs themselves) don't pay you within 45 days of delivery, they cannot claim that expense as a deduction. That's a big stick. The question is — are you using it?

What the rule actually says

Any payment made to a Micro or Small enterprise (registered under MSMED Act 2006) must be made within 15 days if there's no written agreement, or within 45 days if there is one. If the buyer pays after this window, they cannot deduct that expense in the year of purchase — they can only deduct it in the year they actually pay. This creates a genuine tax incentive for your larger customers to pay you on time.

What it means for your collections process

• Every invoice to a large-company customer should now include your Udyam registration number
• Your payment terms in contracts should explicitly reference the 45-day MSMED Act limit
• Your collections team should flag all invoices approaching Day 30 (not Day 45)
• Follow-up sequences need to start at Day 21, not Day 45
• Your accountant should track the 45-day clock from date of delivery, not date of invoice

The document checklist

• Udyam Registration Certificate (download from udyamregistration.gov.in)
• Updated invoice template with UAM/Udyam number printed
• Revised purchase order / agreement language citing 45-day clause
• Collections SOP updated with Day-21 first escalation trigger

How to automate the 45-day tracking

Most businesses track outstanding invoices in Tally or Zoho Books. Neither will automatically flag Section 43B(h) breaches. You need a simple automation: pull all open invoices daily, calculate days-from-delivery for each, and trigger a WhatsApp or email alert to your collections person when an invoice hits Day 21 (first nudge), Day 35 (second nudge, mention tax implications to buyer), and Day 44 (urgent escalation).