One income-tax rule quietly changed how businesses must pay their small suppliers. Under Section 43B(h), if you buy goods or services from a registered micro or small enterprise and don't pay within the time limit, that expense is disallowed as a deduction in the year of purchase — you only get the deduction in the year you actually pay.
The time limit
Payment must be made within the time agreed in writing, capped at 45 days. If there's no written agreement, the limit is 15 days. Miss it, and the deduction shifts to a later year — increasing this year's taxable profit.
Who it applies to
- It applies to amounts payable to suppliers registered as micro or small enterprises under the MSMED Act (Udyam).
- It does not apply to medium enterprises or to traders in most cases.
- The onus is on the buyer to track supplier status and pay on time.
What your business should do
Ask suppliers for their Udyam registration and note whether they are micro or small. Flag those invoices for priority payment within 45 days. Review your creditors before year-end so you don't lose deductions on unpaid MSME bills.
The bigger picture
The rule exists to protect small suppliers from delayed payments. If you're an MSME yourself, registering under Udyam strengthens your right to timely payment. Good bookkeeping is what makes this manageable — you need to know which payables are MSME and how old they are.
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This article is for general information based on rules current at the time of writing and is not professional advice. Rules change — confirm specifics with a GovYapar expert before acting.
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