The 45-Day Payment Rule
In a landmark move to protect micro and small enterprises, the government introduced Section 43B(h) to the Income Tax Act. If a buyer fails to pay a registered MSME supplier within 45 days (if an agreement exists) or 15 days (without an agreement), the expense cannot be claimed as a deduction in that financial year.
Impact on Year-End Accruals
This means any outstanding MSME payables on March 31st that exceed the timeline will be added back to your taxable income, triggering a higher tax outflow. The deduction is only allowed in the year the payment is actually made.