# MSME Delayed Payment Interest Calculator: Section 16 > MSME delayed payment interest calculator: compound interest at 3 times the RBI bank rate, monthly rests, under section 16 after the 15 or 45 day limit. Source: https://trykosh.com/tools/msme-delayed-payment-interest-calculator Free tool - Business and GST # MSME delayed payment interest calculator (MSMED Act) If you're a micro or small enterprise and a buyer pays you late, the law entitles you to steep compound interest. Work out how much you're owed. Rules checked 25 October 2026Free - no sign-upRuns in your browser Interest the buyer owes INR 30,942 143 days late at 17.25% a year (3 x 5.75%), compounded monthly Due date**25 May 2026** Total now due**INR 4,80,942** Simple interest would be**INR 30,412** Invoice **INR 4,50,000**Interest **INR 30,942** Invoice amount INR 4,50,000 Credit period (agreed, max 45 days) 45 days Interest runs from 26 May 2026 Paid on 15 Oct 2026 4 full months compounded at 1.438% a month INR 26,438 \+ 20 more days INR 4,503 Interest payable INR 30,942 Balance with monthly rests Month Date Amount due Interest so far 1 25 Jun 2026 INR 4,56,469 INR 6,469 2 25 Jul 2026 INR 4,63,030 INR 13,030 3 25 Aug 2026 INR 4,69,687 INR 19,687 4 25 Sep 2026 INR 4,76,438 INR 26,438 The buyer can't deduct this interest as a business expense. Only micro and small enterprises registered on Udyam can claim it; medium enterprises and traders are outside sections 15 and 16. ## Upload your statement and Kosh does this for you. Upload your bank statements and Kosh separates business from personal spending and keeps your tax and GST dates in view. [Start free](/signup?via=tool-msme-delayed-payment-interest-calculator) ## How the MSME delayed payment interest calculator works Section 15 of the MSMED Act, 2006 says a buyer must pay a micro or small supplier by the date agreed in writing, which can't be more than 45 days from accepting the goods or services. If there's no written agreement, payment is due within 15 days. If the buyer doesn't object within 15 days of delivery, acceptance is deemed to be the delivery date. If the buyer misses that date, section 16 makes them pay compound interest with monthly rests at three times the bank rate notified by the RBI, from the day after the due date until payment. The bank rate is an input here. It has been 5.75% since the RBI's 7 October 2026 policy (5.5% before that), so the interest rate is 17.25% a year. Check the current bank rate on rbi.org.in. The calculator counts full months from the due date and compounds the balance each month, then adds simple interest for the remaining days. It also shows simple interest at the same rate for comparison: monthly compounding is what makes MSME interest bite. On the income-tax side, buyers have had another reason to pay on time since FY 2023-24. Under the rule introduced as section 43B(h), a purchase from a micro or small enterprise that isn't paid within the MSMED time limit is deductible only in the year it's actually paid. If the due date passes and the year ends unpaid, the buyer loses the deduction for that year. The interest itself is never deductible for the buyer under section 23 of the MSMED Act. Amount due = invoice x (1 + 3 x bank rate / 12)^months x (1 + 3 x bank rate x days / 365) months full months after the due date days remaining days after the last full month ## Worked example: Anita's packaging unit in Pune, owed by a large buyer Anita runs a micro enterprise registered on Udyam. A buyer accepted INR 6,80,000 of cartons on 15 January 2026 on 30-day terms, so payment was due by 14 February. It arrived on 20 June, 126 days late. At 16.5% (three times the 5.5% bank rate in force then) compounded monthly, the buyer owes INR 40,126 in interest, against INR 38,732 as simple interest. Because the payment slipped past 31 March, the buyer also can't deduct this purchase in FY 2025-26. Interest the buyer owes INR 40,126 126 days late at 16.5% a year (3 x 5.5%), compounded monthly Paid after the year ends (FY 2025-26): the buyer loses the deduction for this purchase in FY 2025-26 and claims it only in the year of payment (old section 43B(h)). Due date**14 Feb 2026** Total now due**INR 7,20,126** Simple interest would be**INR 38,732** Invoice **INR 6,80,000**Interest **INR 40,126** Invoice amount INR 6,80,000 Credit period (agreed, max 45 days) 30 days Interest runs from 15 Feb 2026 Paid on 20 Jun 2026 4 full months compounded at 1.375% a month INR 38,178 \+ 6 more days INR 1,948 Interest payable INR 40,126 The buyer can't deduct this interest as a business expense. Only micro and small enterprises registered on Udyam can claim it; medium enterprises and traders are outside sections 15 and 16. [Load this example into the calculator ->](?amount=680000&accepted=2026-01-15&days=30&paid=2026-06-20&bankRate=5.5#calculator) ## Good to know - Only micro and small enterprises with Udyam registration are covered. Medium enterprises, and traders registered only for priority-sector lending, can't claim this interest. - If a buyer won't pay, file a case with the Micro and Small Enterprises Facilitation Council through the MSME Samadhaan portal. A buyer who wants to challenge an award must first deposit 75% of it. - Mention the MSMED Act terms and your Udyam number on invoices and purchase orders. It reminds buyers of the 45-day cap. - Companies must report dues to micro and small suppliers outstanding beyond 45 days in a half-yearly return to the registrar (MSME Form I). ## Frequently asked questions What is the interest rate on delayed payments to MSMEs? Three times the bank rate notified by the RBI, compounded monthly. With the bank rate at 5.75% (since 7 October 2026), that's 17.25% a year, or about 1.44% a month on a growing balance. Within how many days must a buyer pay an MSME? Within the period agreed in writing, up to a maximum of 45 days from acceptance of the goods or services. If nothing is agreed in writing, within 15 days. Does the 45-day rule apply to medium enterprises? No. Sections 15 and 16 of the MSMED Act protect micro and small enterprises only, and the income-tax disallowance under the 43B(h) rule also applies only to dues to micro and small suppliers. Can a buyer claim MSME interest as a business expense? No. Section 23 of the MSMED Act says interest paid under section 16 is not allowed as a deduction when computing the buyer's income. How does 43B(h) affect buyers who pay MSMEs late? If a buyer pays a micro or small supplier after the MSMED time limit, the expense is deductible only in the year of actual payment, not the year it was incurred. A purchase made in February and paid in June lands in the next year's tax computation. ## Sources and assumptions - [Reserve Bank of India](https://www.rbi.org.in/) - [MSME Samadhaan (delayed payments portal)](https://samadhaan.msme.gov.in/) Rules and rates last checked on 25 October 2026. Results are estimates for planning and education, not tax, legal or investment advice. Kosh is an educational financial planning tool by Primedepth Labs. It is not a SEBI-registered investment adviser and does not offer personalised investment advice, hold your money or execute trades. Markets carry risk; read scheme documents carefully and consult a registered adviser before acting.