MSME late payment interest calculator and reminder letter
Is a buyer paying you late? Find out how much interest the law says they owe, then make a polite but firm reminder letter. Everything is worked out on your own phone or computer. Nothing you type is sent to us.
The rule in one line. A micro or small supplier must be paid within the time agreed in writing, never later than 45 days after the buyer accepts the goods or service (15 days if nothing is agreed in writing). After that the buyer owes interest at three times the RBI Bank Rate, added up month by month.
Fill in the form and tap Work out the interest. Your due date, days late, interest and total will appear here.
Make a reminder letter for the buyer
Polite but firm. It states the amount, the due date and the interest from Step 1, and quotes the law. Fill in the details; the letter updates as you type.
Check every figure, sign it, and send it by e-mail and courier. Keep proof. Attach the invoice, proof of delivery and your Udyam certificate. To save a PDF, choose "Save as PDF" in the print window. We send nothing anywhere unless you tap the WhatsApp button.
The 45-day rule, interest and tax, in plain words
- Section 15, MSMED Act, 2006 (time to pay). The buyer must pay on or before the date agreed in writing, and that date cannot be more than 45 days after the buyer accepted the goods or service. With no written agreement the limit is 15 days. Acceptance is normally the day of delivery, unless the buyer objects in writing within 15 days of delivery.
- Section 16 (interest). If the buyer pays late, the buyer must pay compound interest with monthly rests at three times the Bank Rate notified by the Reserve Bank of India. "Compound with monthly rests" means each month's interest is added to the amount, and the next month's interest is charged on the larger amount. A contract term that says otherwise does not change this.
- Section 43B(h), Income-tax Act, 1961 (the buyer's tax). From financial year 2023-24, if a buyer pays a micro or small supplier after the Section 15 time limit, the buyer can claim the deduction for that cost only in the year it actually pays. This is why many finance teams pay small suppliers on time. The Income-tax Act, 2025 replaces the 1961 Act from 1 April 2026; ask your CA how the rule reads there.
Bank Rate used on this page: 5.75% as notified by RBI on 7 October 2026; check rbi.org.in. Three times that is 17.25% a year.
Who is covered
- The supplier must be a micro or small enterprise registered on Udyam. Medium enterprises are not covered.
- Your registration should be in place when you supply. A registration taken later may not cover earlier supplies.
- Government guidance indicates that units registered only as retail or wholesale traders are generally not covered by Sections 15 and 16. Ask your CA if this is you.
- The buyer can be a private company, a government department or a public sector company.
The MSMED (Amendment) Act, 2026 was published in the Gazette on 13 August 2026; its provisions begin on dates the Central Government notifies. It adds time limits for Facilitation Council cases and a new invoice-settlement provision for central public sector buyers. We have not seen any change to the 45-day limit or the interest rule in reports of the Act. Law last checked on this page: 23 October 2026. This page gives general information, not legal advice.
What to do when a reminder letter is ignored
Keep your papers ready
Udyam certificate, invoice, proof of delivery or acceptance, your ledger or statement, and every letter, e-mail or WhatsApp you sent about the payment.
File online with the Facilitation Council
A reference goes to the Micro and Small Enterprises Facilitation Council of your state. The Ministry of MSME takes these online through the MSME Samadhaan portal (samadhaan.msme.gov.in) and the online dispute resolution portal (odr.msme.gov.in). Check which one is taking new filings when you file. You do not need a lawyer to file.
Settlement first, then a decision
The council first tries to settle the matter between you and the buyer. If that fails, it decides the case through arbitration. The law sets 90 days for the council to decide, though contested cases can take longer.
A buyer who disagrees must deposit money
A buyer who wants to challenge the council's award in court must first deposit 75% of the awarded amount. This is one reason many buyers settle.
UGrowth can draft and follow up for you
Not sure where to start? Send Arjun your figures on WhatsApp. He will look at your case on a free first call and tell you what he would do. We do not promise a result: the buyer and the council decide.
MSME payment rules: common questions
What is the MSME 45 days payment rule?
Under Section 15 of the MSMED Act, 2006, a buyer must pay a micro or small enterprise on or before the date agreed in writing, and that date cannot be more than 45 days after the buyer accepted the goods or services. If there is no written agreement, payment is due within 15 days of acceptance. Acceptance is normally the day of delivery, unless the buyer objects in writing within 15 days of delivery.
How much interest can a small supplier charge for late payment?
Under Section 16, the buyer must pay compound interest with monthly rests at three times the Bank Rate notified by the Reserve Bank of India, from the day after the payment was due. With the Bank Rate at 5.75% (announced by RBI on 7 October 2026), that is 17.25% a year. The law applies this whatever the contract says. The Bank Rate changes from time to time, so check rbi.org.in.
Does the rule cover medium enterprises, or businesses not on Udyam?
No. The payment protection in Sections 15 and 16 is for micro and small enterprise suppliers registered on Udyam. Medium enterprises are not covered. Your registration should be in place when you supply the goods or services; a registration taken later may not cover earlier supplies. Government guidance also indicates that units registered only as retail or wholesale traders are generally not covered. If you are unsure, ask your CA.
What is Section 43B(h) and why does it matter to my buyer?
Section 43B(h) of the Income-tax Act, 1961 applies from financial year 2023-24. If a buyer pays a micro or small supplier later than the Section 15 time limit, the buyer can claim the tax deduction for that expense only in the year it actually pays, not in the year it bought. This gives many buyers a reason to pay on time. The Income-tax Act, 2025 replaces the 1961 Act from 1 April 2026, so ask your CA how the rule reads there.
What can I do if the buyer still does not pay?
Send a written reminder first and keep proof that you sent it. If the buyer still does not pay, you can refer the matter to the Micro and Small Enterprises Facilitation Council of your state under Section 18, online through the Ministry of MSME's Samadhaan or online dispute resolution (ODR) portal. The council first tries to settle the matter and, if that fails, decides it through arbitration. The law sets 90 days for the council to decide, though contested cases can take longer.
UGrowth is not a law firm. This page gives general information and an estimate, not legal advice. UGrowth is not connected with the Government of India, the RBI or the Ministry of MSME.
