Tool
MSME interest calculator — statutory interest on late payments to micro and small suppliers.
Under Sections 15 and 16 of the MSMED Act, a buyer that pays a registered micro or small supplier late owes compound interest, with monthly rests, at three times the RBI bank rate. Enter the figures. Nothing is stored or sent.
Reviewed by Shraddha Rathod, Head of B2B Collections · B.Com, LL.B · Last reviewed · How we review
How the interest is calculated
- The due date. If a credit period was agreed in writing, payment is due at its end, but never more than 45 days after acceptance. If none was agreed, payment is due 15 days after acceptance (Section 15). Acceptance is deemed on delivery if the buyer raised no objection within 15 days.
- When interest starts. From the day after the due date (Sections 2(b) and 16). Each day after the due date counts, up to and including the day of payment.
- The rate. Three times the bank rate notified by the Reserve Bank of India, compounded with monthly rests (Section 16). At a bank rate of 5.75%, that is 17.25% a year, or 1.4375% a month.
- The arithmetic. Amount × (1 + monthly rate)full months × (1 + monthly rate × remaining days ÷ days in that month), with months counted from the due date. Interest is the result minus the amount.
This is an estimate, not legal advice. It uses one bank rate for the whole period; if the rate changed while the payment was late, the figure is approximate. It does not handle part-payments. The supplier must have been registered as a micro or small enterprise on Udyam at the time of supply. The buyer cannot deduct this interest for income tax (Section 23).
Questions people ask
How is interest on delayed MSME payments calculated?
Under Section 16 of the MSMED Act, a buyer that pays a micro or small supplier late owes compound interest, with monthly rests, at three times the bank rate notified by the Reserve Bank of India, from the day after the payment was due.
When is payment to an MSME supplier due?
On the date agreed in writing, but no later than 45 days after acceptance. If no period was agreed, payment is due 15 days after acceptance, and acceptance is deemed on delivery if the buyer raised no objection within 15 days.
Which bank rate applies?
The bank rate notified by the Reserve Bank of India. It was 5.75% from 7 October 2026, so the statutory rate was 17.25% a year. Check the current rate on rbi.org.in.
Who can claim MSMED Act interest?
A supplier registered as a micro or small enterprise on Udyam at the time of supply. Medium enterprises are not covered by the delayed-payment provisions.
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