Writing · Field note

MSME-1 and Section 43B(h): what finance teams need ready by 31 October

General information drawn from public sources, not legal or tax advice. Check the official text and take advice from your own counsel or CA/CS before acting.

MSME Form 1 (MSME-1)

Under the MCA order issued under Section 405 of the Companies Act, 2013, companies that receive supplies of goods or services from micro or small enterprises and whose payments are outstanding for more than 45 days from acceptance (or deemed acceptance) must file a half-yearly return on the MCA portal.

• April–September half: due by 31 October.
• October–March half: due by 30 April.

The return lists each such supplier, the amount due and the reasons for delay. The form has been revised in recent years, so check the current version and its fields on the MCA portal.

The MSMED Act time limit

Section 15 of the MSMED Act, 2006 requires payment to a micro or small supplier within the agreed date, which cannot exceed 45 days from acceptance. If there is no written agreement, the limit is 15 days. Delayed payments attract compound interest at three times the RBI bank rate (Section 16).

Section 43B(h) of the Income-tax Act

From assessment year 2024-25 (FY 2023-24 onwards), a sum payable to a micro or small enterprise beyond the Section 15 time limit is deductible only in the year it is actually paid. An unpaid overdue amount at year-end can therefore increase taxable profit for that year. Generally:

• It applies to micro and small enterprises, not medium ones.
• The supplier must be a micro or small "enterprise" under the MSMED Act; traders' treatment depends on the classification, so check with your CA.
• Udyam registration status and category on the relevant dates matter.

The Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026. For tax year 2026-27 onwards the same rule sits in Section 37(2)(g) of the 2025 Act, and, as before, it gets no relief for paying before the return due date (Section 37(3)). Section 43B(h) still applies to FY 2025-26 and earlier. Confirm the treatment for your year with your CA.

Data you need

1. Vendor master with Udyam registration number and category (micro/small/medium).
2. Invoice register: invoice date, acceptance date, amount, payment date.
3. Whether a written agreement sets a payment period (15 vs up to 45 days).
4. Ageing of each invoice against its limit, plus the list over 45 days at the half-year end.

Official sources

• Ministry of Corporate Affairs, mca.gov.in: Specified Companies (Furnishing of information about payment to micro and small enterprise suppliers) Order, 2019 (S.O. 368(E), 22 Jan 2019), MSME Form I
• Ministry of MSME, MSMED Act, 2006, Sections 15–16
• Income Tax Department, incometaxindia.gov.in: Income-tax Act, 1961, Section 43B(h) (inserted by Finance Act, 2023) and Income-tax Act, 2025, Section 37

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