MSME Delayed Payment Interest Calculator (Section 16)

Compound interest with monthly rests at three times the RBI bank rate you enter.

An illustration of section 16 of the MSMED Act, 2006, for a buyer who already knows the supplier is covered. It is not a ruling and not a tax computation.

Invoice dateRecorded only. The Act runs from acceptance or deemed acceptance, not from the invoice date.Acceptance datePayment dateAmount (₹)

Was there a written credit period?

Agreed daysRBI Bank Rate, % per yearSection 16 uses three times the bank rate notified by the Reserve Bank of India. This box starts empty so the page does not treat any number as today’s rate. Look it up on rbi.org.in

Results

Due date: 24 Apr 2026
Interest starts: 25 Apr 2026
Calendar days after the due date: 21

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The rule this uses

Section 15 of the MSMED Act, 2006 requires payment on or before the date agreed in writing, or, if nothing is agreed, before the appointed day. The written period shall not exceed 45 days from acceptance or deemed acceptance. Section 2(b) defines the appointed day as the day after fifteen days from acceptance. Section 16 makes a late buyer liable for compound interest with monthly rests at three times the bank rate notified by the Reserve Bank, from the appointed day or from the day after the agreed date. The liability applies notwithstanding any agreement.

This tool uses the same reading as our MSME payment guide: with no written period the due date is 15 days after the acceptance date you enter, and with a written period it is that number of days capped at 45. Interest starts the next day. Each full calendar month from that start is one rest. A part-month is simple interest for those days divided by the number of days in that month. Paying on the first day interest runs accrues one day. The Act does not spell out that day-count fraction. An MSEFC or a CA may count the dates differently.

If you type a bank rate of 6% a year, three times is 18% a year and one monthly rest is 1.5%. On ₹1,00,000 that is ₹1,500 for a full month, and the next month compounds. Six percent is arithmetic so you can see the formula. It is not the Bank Rate published today. Type the figure you read on the Reserve Bank’s site.

Section 23 of the MSMED Act says interest paid or payable under the Act is not allowed as a deduction under the Income-tax Act. Section 43B(h) is a separate rule about the deduction for the supply itself. The tool only flags that a late payment may defer that deduction. Who counts as a micro or small supplier, including the treatment of traders, is discussed in the MSME 45-day payment guide.

MSMED Act, 2006 (Ministry of MSME PDF). Reserve Bank of India — policy rates, including the Bank Rate.

FAQs

What interest rate does section 16 use?

Compound interest with monthly rests at three times the bank rate notified by the Reserve Bank of India. The Act does not print a percentage. You type the Bank Rate from rbi.org.in. The tool multiplies it by three. It does not store a current rate.

Is the due date 15 days or 45 days?

If there is no written agreement, this illustration uses 15 days from acceptance. If there is a written period, it uses that period but not more than 45 days. Section 15 is the source. A contract that says 60 or 90 days is capped at 45 for a supplier the Act covers.

Does this calculate the section 43B(h) disallowance?

No. If the payment is after the due date, the tool says the deduction may be deferred until the year of payment. It does not compute taxable income, and it does not decide whether a particular vendor is a micro or small supplier.