Calculate interest on overdue payments. Includes Section 43B(h) MSME compliance check.
Free - No signup - India-specificRBI reference rate: 18% p.a. for commercial transactions
Late payment interest is typically calculated using the simple interest formula: Interest = Principal x Rate x Days / 365. The principal is the overdue invoice amount, the rate is the agreed annual interest rate, and days is the number of days the payment is overdue.
Common interest rates for commercial transactions in India range from 12% to 24% per annum. The RBI reference rate of 18% is frequently used as a benchmark when no specific rate is agreed upon.
Section 43B(h) was added by the Finance Act 2023 and became effective from April 2024. It applies specifically to buyers who purchase from MSME-registered suppliers.
The rule: If a buyer has a written agreement with an MSME supplier, payment must be made within 45 days. Without a written agreement, the limit is just 15 days.
Tax consequence: If the buyer pays after the deadline, they cannot deduct the expense from their taxable income for that financial year. The deduction is only allowed in the year when payment is actually made.
This gives MSME suppliers significant leverage for faster payment collection. When sending payment reminders, citing Section 43B(h) can accelerate payment from large buyers.
Under Section 50 of the CGST Act, interest at 18% per annum is charged on late payment of GST. This applies to the net tax liability after adjusting input tax credit.
The interest is calculated from the day following the due date of payment to the date of actual payment. Both CGST and SGST components carry the same 18% interest rate.
There is no single standard rate. The RBI reference rate is often used as a benchmark. Common commercial rates range from 12% to 24% per annum. The rate should ideally be specified in your payment terms or contract.
No. It applies specifically when the buyer is purchasing from a supplier registered as an MSME under the MSMED Act 2006. If the supplier is not MSME-registered, 43B(h) does not apply.
Under Section 43B(h), if a buyer has a written agreement with an MSME supplier, payment must be made within 45 days. Without a written agreement, the limit is 15 days. Payments made after this period cannot be claimed as tax deductible expenses.
Yes, if your payment terms or contract specify late payment interest. Even without explicit terms, you may be able to claim interest under commercial law. Always specify interest terms clearly in your invoices.
Under Section 50 of the CGST Act, interest at 18% per annum is charged on late payment of GST. This is calculated on the net tax liability after adjusting input tax credit.