MSME Late Payment Interest Calculator
Work out what a client owes you for paying after the 45 day limit: compound interest at three times the RBI bank rate, under the MSMED Act.
Payment terms
Payment was due
12 August 2026
Days late
90
Interest at 17.25%
₹4,305.90
Total now due
₹1,04,305.90
2 months compounded monthly at 1.4375% a month, plus 29 days of simple interest. Three times the bank rate of 5.75%, applied to the whole period. If the bank rate changed while the payment was late, a facilitation council may apply each rate to its own months, and may round differently.
Before you chase a late payment
- Register on Udyam. It is free, online and based on your PAN and Aadhaar. The protection covers micro and small enterprises registered before the supply.
- Put the terms on every invoice. Your Udyam number and a line such as "Payment due within 30 days. Late payments attract interest under Section 16 of the MSMED Act."
- Send a reminder with the number. Use this calculator to show the interest owed so far.
- Escalate if you have to. File on the MSME Samadhaan portal for the state facilitation council.
Late payment questions
How many days does a client have to pay a micro or small enterprise?
Whatever was agreed in writing, but never more than 45 days from the day the client accepted the work. With no written agreement, payment is due within 15 days of acceptance. This comes from Section 15 of the MSMED Act, 2006.
What interest can I charge on a late payment?
Compound interest with monthly rests at three times the bank rate notified by the RBI, from the day payment fell due (Section 16 of the MSMED Act). With the bank rate at 5.75% since 7 October 2026, that is 17.25% a year. The client cannot contract out of it.
Who can claim this interest?
Micro and small enterprises with Udyam Registration. Since 1 April 2025, a business is micro if its investment is up to ₹2.5 crore and turnover up to ₹10 crore, so almost every freelancer and small agency qualifies. Registration on the Udyam portal is free and online.
How do I recover the money if the client still does not pay?
File a reference with the Micro and Small Enterprise Facilitation Council of your state through the MSME Samadhaan portal. The council is meant to decide within 90 days, and a buyer who challenges its award in court must first deposit 75% of the amount.
Why would a client care about the 45 day rule?
Because of their own income tax. Under Section 43B(h) of the old Income-tax Act, now Section 37(2)(g) of the Income-tax Act, 2025, a business that pays a micro or small supplier after the MSMED deadline can deduct that expense only in the year it actually pays. Mentioning this politely often speeds payment up.
General information, not legal advice. Rules and the bank rate checked on 8 October 2026.
Guides
- Clients paying late? The MSME 45 day rule and the interest you can claim
Buyers must pay micro and small suppliers within 45 days or owe compound interest at 3 times the RBI bank rate. How freelancers and agencies use the rule.
- GST invoice format for services: every field the law asks for
The fields Rule 46 requires on a GST tax invoice for services, how to number invoices, the 30 day deadline, and when to issue a bill of supply instead.
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