Back to Tools Hub*section 15 & 16 msmed act 2006 statutory calculator*

MSME Late Payment Interest Calculator

Calculate mandatory compound interest at 3 times the RBI Bank Rate with monthly rests for delayed payments by corporate buyers under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006.

Current RBI Bank Rate: 6.75%Statutory Penalty Rate: 20.25% p.a.Compounded Monthly (Sec 16)

Invoice & Payment Parameters

The basic tax invoice amount due from the buyer.
Date of delivery of goods or rendering of services.
Section 15 stipulates that agreed payment terms cannot exceed 45 days.
The date payment was actually received or today's recovery date.
Official RBI benchmark rate (currently 6.75%). Statutory interest is 3x this rate.

Statutory Claim Computation

Total Recoverable Amount (Principal + Interest)
₹ 2,62,826
Principal Invoice Amount₹ 2,50,000
Statutory Due Date2026-07-16
Period of Delay91 Days Overdue
Statutory Interest Rate (3x Bank Rate)20.25% p.a.
Compounded Interest Accrued+ ₹ 12,826
Legal Enforcement Notice: Under Section 16 of the MSMED Act, this interest is mandatory and cannot be waived by any agreement. Furthermore, buyers cannot claim this penalty interest as an income tax deduction under Section 23 of the MSMED Act and Section 43B(h) of the Income Tax Act.

Key Protections Under MSMED Act 2006 & Section 43B(h)

1. Mandatory 45-Day Payment Window (Section 15): Indian law prohibits buyers from extending payment cycles beyond 45 days for registered Micro and Small enterprises. Even if an agreement specifies 60 or 90 days, it is void to the extent it exceeds 45 days.

2. Non-Deductibility of Interest (Section 23): Penalty interest paid by corporate buyers under the MSMED Act cannot be deducted as a business expenditure when filing Corporate Income Tax returns.

3. Income Tax Disallowance under Section 43B(h): Introduced in the Finance Act, if a buyer fails to pay a registered MSME within the Section 15 timeline, the entire purchase invoice amount is disallowed as an expense in that financial year and added directly to the buyer's taxable income.