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MSME Late Payment Interest Calculator

Interest on delayed payment to a registered MSME. The MSMED Act caps the credit period at 45 days regardless of what was agreed, and sets the interest at three times the RBI bank rate compounded monthly.

Also called: msme interest calculator, delayed payment msme act.

₹
%
Interest payable
₹35,782

₹35,782 on an invoice of 8,50,000 delayed 75 days beyond the 45 day statutory maximum. The rate is 20.25%, three times the RBI bank rate, compounded monthly. The 45 day cap and the rate are statutory under the MSMED Act and cannot be varied by contract.

Days beyond the limit
75
Statutory maximum credit period
45
Applicable rate
20.25%
Total now payable
₹8,85,782
Accruing per day
₹477
On the statutory position
The 45 day cap and the rate are statutory under the MSMED Act and cannot be varied by contract.
How this is calculated
Method and background

How this is calculated

Under the MSMED Act, payment to a registered micro or small enterprise is due within the agreed period or 45 days, whichever is earlier. Beyond that, compound interest at three times the RBI bank rate runs monthly, and it is not negotiable by contract. The buyer also loses the income tax deduction for the expense until it is actually paid, which is often the larger consequence. The rate here is statutory rather than a rate anyone chose.

three times the RBI bank rate, compounded monthly, from the day payment became due
b
RBI bank rate

Worked examples

Each of these is asserted on every build. If a change to the engine ever moved one of these answers, the build would fail before the page could print it.

an invoice paid at 120 days

Invoice amount
₹8,50,000
Agreed credit period
45
Days actually taken
120
RBI bank rate
6.75%

Interest payable₹35,782

3 x 6.75%; 120 less the 45 day cap

Open this example

an agreed 90 days still caps at 45

Invoice amount
₹8,50,000
Agreed credit period
90
Days actually taken
60
RBI bank rate
6.75%

Interest payable₹7,039

boundary: the Act overrides the agreement

Open this example

Method and limits

What it assumes

  • The supplier is a registered micro or small enterprise under the Act.

What it deliberately does not model

  • Medium enterprises are outside the payment protection.
  • The bank rate changes and the applicable rate follows it.
  • This is a mechanical calculation, not legal advice on a specific dispute.

Formula version 1.0.0 · definition 1.0.0 · India · Report a problem with this calculator

Frequently asked questions

Can we agree a longer credit period?
Not beyond 45 days for a registered micro or small enterprise. The Act overrides the contract, and an agreement to a longer period does not stop the interest running.
What if we just pay the invoice late without interest?
The interest is a statutory liability whether or not it is claimed. Separately, the buyer cannot deduct the expense for income tax until payment is actually made.