Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
Pay micro/small within 45 days
Applies to dues to Udyam-registered micro and small enterprises.
Else disallowed till paid
The expense is added back to income for that year and allowed only when paid. Confirm applicability for your suppliers.
When the clock runs, and how to stay clear
The clock depends on the agreement. Where there’s a written agreement, the limit is the period stated in it, capped at 45 days from acceptance of the goods or services; with no written agreement, it’s 15 days. The rule applies only to dues to suppliers registered as micro or small on Udyam — medium enterprises and unregistered suppliers are outside it — so the first practical step is to collect Udyam status from your vendors and flag which are micro or small. The disallowance bites in the year the payment is overdue at year-end and is allowed only in the year you actually pay, which can pull forward a tax cost. To stay clear, identify micro and small suppliers in your accounting system, track their invoice ageing against the 45- or 15-day limit, and clear those dues before 31 March. The corresponding MSME-1 half-yearly return also reports outstanding dues beyond 45 days, so the two obligations work together — and good vendor records make both easy.