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Payments to Micro and Small Enterprises: AY 2024-2025
As per Section 43B(h) of the Income Tax Act, payments made to the Micro and Small Enterprises will be allowed as deduction in the same financial year as they are accrued only if the payment is made within the time limit specified under the MSMED Act.
Micro, Small and Medium Enterprises:
As per Section 7 of the MSMED Act, a micro, small and medium enterprise is classified as below:
| Particulars | Micro Enterprise | Small Enterprise | Medium Enterprise |
| Investment in Plant and Machinery or Equipment; and | Not more than Rs.1 crore | Not more than Rs.10 crore | Not more than Rs.50 crore |
| Turnover | Not more than Rs.5 crore | Not more than Rs.50 crore | Not more than Rs.250 crore |
Section 15 of the MSMED Act:
As per the MSMED Act, a buyer is liable to make the payment to the supplier within a period of 15 days from the day of acceptance or the day of deemed acceptance if there is no agreed date of payment and within a maximum period of 45 days when the period is agreed.
Delayed payment to Micro or Small Enterprise:
While computing the income for the AY 2024-2025, in case of delayed payment to a micro or small enterprise, the amount paid will be allowed as deduction in the year in which the payment is made. The payment will be allowed as deduction on accrual basis only if the payment is made within the specified time limit under section 15 of the MSMED Act.
Interest liability in case of delayed payment under MSMED Act:
As per Section 16 of the MSMED Act, if the buyer fails to make the payment to the supplier within the specifed time limit, then the buyer will be liable to pay interest at three times of the bank rate notified by the Reserve Bank of India.