Calculate interest on overdue payments. Includes Section 43B(h) MSME compliance check.
Free - No signup - India-specificWhen the payment was made or is expected
MSMED Act: 3x RBI bank rate (3 x 5.50% = 16.50% p.a.)
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Disclaimer: This calculator provides estimates based on the MSMED Act, 2006 and Section 43B(h) of the Income Tax Act. The RBI bank rate used may not reflect the latest notification. Interest calculations use standard monthly compounding. For precise compliance assessment, please consult a qualified Chartered Accountant.
Under the MSMED Act, late payment interest is calculated using compound interest at monthly rests. The rate is 3 times the RBI bank rate (currently 3 x 5.50% = 16.50% per annum). This compounds monthly, meaning interest is charged on accumulated interest each month.
Section 43B(h) was added by the Finance Act 2023, effective from 1 April 2024 (AY 2024-25 onwards). It applies to buyers purchasing from Micro and Small enterprises registered under the MSMED Act.
Payment deadlines: With a written agreement - 45 days. Without agreement - 15 days. Payments beyond this deadline cannot be deducted as business expenses in that financial year.
Important: This applies only to Micro and Small enterprises. Medium enterprises are NOT covered by Section 43B(h).
Under Section 50 of the CGST Act, interest at 18% per annum is charged on late payment of GST, calculated on net tax liability after adjusting input tax credit.
3 times the RBI bank rate, compounded monthly. Currently 3 x 5.50% = 16.50% per annum.
No. It applies only when the supplier is a registered Micro or Small enterprise. Medium enterprises are excluded.
With a written agreement: 45 days. Without agreement: 15 days. Exceeding these limits triggers 43B(h) non-deductibility.
Yes. Under MSMED Act Section 16, compound interest at 3x RBI bank rate (monthly rests) is legally mandated for overdue payments to MSME suppliers.
18% per annum under Section 50 of CGST Act, on the net tax liability after ITC adjustment.