Section 43B(h)

What it means

Section 43B(h) of the Income-tax Act, 1961 applied from financial year 2023-24 (assessment year 2024-25). From 1 April 2026 the same rule continues as section 37(2)(g) of the Income-tax Act, 2025. It covers amounts a buyer owes to a micro or small enterprise. If the buyer pays within the time limit set by Section 15 of the MSMED Act, at most 45 days from acceptance, the expense is deductible as usual. If the buyer pays late, the deduction is allowed only in the year the payment is actually made, and paying before the return due date does not help.

In simple terms: a buyer who keeps a micro or small supplier's invoice unpaid past the legal limit at year-end may pay more tax that year.

Who it applies to

• Only dues to micro and small enterprises; not medium.
• Dues to Udyam-registered retail or wholesale traders are likely outside it. There is no CBDT clarification, but the majority professional view follows the Ministry of MSME Office Memoranda of 2021 that exclude traders from the delayed-payment provisions.
• Buyers on presumptive taxation (such as 44AD) are likely unaffected, because deemed profits replace normal deductions. This is an inference from the statute; there is no official clarification.

Why it matters for getting paid

The rule gives buyers their own reason to clear MSME dues on time, especially near 31 March. As a supplier, you can mention it politely, without threats.

What helps:

• Be a registered micro or small enterprise and show your Udyam number on invoices.
• Agree a clear credit period in writing, within the limit allowed by the MSMED Act.
• Send a friendly reminder in February and March that lists invoices nearing the limit.

Whether a particular buyer's deduction is affected depends on the facts, so the buyer's tax adviser should confirm.

Read Section 43B(h) explained and the MSME 45-day rule.