MSME 45-Day Payment Rule: What to Do When Buyers Pay Late (2026)

Last updated: October 2026

Many small businesses deliver on time but wait months for payment. The law protects you. If you are a micro or small business registered on Udyam, your buyer must pay you on time. If they don't, they pay you interest, and they can lose a tax benefit too.

The Rule in One Line

Buyers must pay within 15 days, or within the agreed time if there is a written agreement, but never later than 45 days.

• No written agreement: pay within 15 days of accepting your goods or service
• Written agreement: pay as agreed, maximum 45 days

Who is protected: micro and small businesses with Udyam registration. Medium businesses are not covered. Sales made before your registration date are not covered, so register early.

What If the Buyer Pays Late?

1. The buyer owes you interest

The buyer must pay interest at 3 times the RBI bank rate, compounded monthly. In 2026 that is roughly 16.5% a year. They also cannot deduct this interest as a business expense.

2. The buyer loses a tax benefit

If the buyer hasn't paid you within the time limit by the end of the financial year (31 March), they cannot show that purchase as an expense in that year's income tax. They can claim it only in the year they actually pay. This rule (known as Section 43B(h)) continues under the new Income-tax Act, 2025. It is the main reason many buyers now clear small-supplier bills before March.

Simple Example

You supply goods worth ₹2 lakh on 1 February with a 45-day written agreement. The buyer must pay by 18 March. If they still haven't paid on 31 March, they cannot claim that ₹2 lakh as an expense for that year, and they owe you interest from 18 March until they pay.

How to File a Complaint

New process: From 15 October 2025, new complaints go on the MSME ODR portal at odr.msme.gov.in. The old MSME Samadhaan portal no longer takes new cases; use it only to track old ones.

1. Log in with your Udyam details.
2. Add the buyer's details, your invoices and the amount due.
3. The portal first tries to settle the matter through online talks and conciliation.
4. If that fails, your state's MSE Facilitation Council decides the case and can order the buyer to pay the amount plus interest.

Filing is free for micro and small suppliers. If the buyer goes to court against the order, they must first deposit 75% of the amount.

Keep These Documents

• Udyam certificate
• Purchase order or agreement
• Invoices and delivery or acceptance proof
• Account statement showing the pending amount
• Copies of reminders sent

Simple Habits That Get You Paid Faster

• Print your Udyam number on every quotation and invoice
• Write "Payment within 45 days as per MSMED Act" on invoices
• Send a polite reminder mentioning the rule before filing a complaint. It often works.
• If you supply to big companies, use TReDS to get paid early (see MSME Loan Options)

Common Questions

Does this rule apply to traders?

This point is debated for trading businesses. If you are a trader, take advice from a CA or lawyer for your case.

Can I claim interest if the buyer paid late but has now paid?

Yes. Interest is due for the delay period even after the main amount is paid.

Is there a fee to file a complaint?

No. It is free for micro and small suppliers.

Disclaimer: General information, not legal or tax advice. For disputes, consult a professional.