Late payment interest calculator
Enter the unpaid amount, the acceptance date and the RBI bank rate in force. This computes the appointed day under the 45-day rule and the compound interest owed under section 16 of the MSMED Act.
How the calculation works
Three numbers drive it. The appointed day is the acceptance date plus your agreed credit period, or plus 45 days, whichever is shorter. Everything after that day is overdue. The rate is three times the RBI bank rate, so a bank rate of 6.25% produces 18.75% a year. And the compounding is monthly, not annual, which is what makes long delays expensive.
Monthly rests compound faster than most people expect. On a 1,00,000 invoice at a 6.25% bank rate, a delay of one year adds a little over 20,000 rather than the 18,750 that simple interest would produce. Two years adds close to 45,000. The gap widens the longer it runs.
The part that makes it useful
This liability is statutory. It does not depend on your invoice terms, your customer agreeing to it, or a clause in a purchase order. Section 16 says the buyer is liable, and section 15 fixes the deadline the buyer cannot contract out of. Section 23 goes further and disallows the interest as a deductible expense for the buyer, which their finance team tends to care about.
In practice, most small suppliers never mention any of it, and their reminders read as requests. A reminder that states the appointed day, the days overdue and the accrued statutory interest reads as a notice. That difference in framing collects more money than any amount of politeness. The payment reminder writer builds that message for you.
Before you rely on the number
This is arithmetic, not legal advice. Whether the MSMED Act remedy is available to you depends on your registration status, the nature of the supply and the facts of the acceptance. The dates that matter in a dispute are the ones you can evidence. Before sending a formal notice or filing a reference, put the facts in front of a professional.
Common questions
- What is the 45-day rule?
- Under section 15 of the MSMED Act 2006, a buyer must pay a registered micro or small enterprise by the date agreed in writing, and in any case no later than 45 days from the day the goods or services were accepted. An agreement for longer credit does not override the 45-day ceiling for this purpose.
- How is the interest rate fixed?
- Section 16 sets it at three times the bank rate notified by the Reserve Bank of India, compounded with monthly rests. It is not the rate written in your own terms, and it is not negotiable downward by contract.
- Does this apply to every supplier?
- No. The MSMED Act remedy is available to suppliers registered as micro or small enterprises, typically evidenced by Udyam registration. Medium enterprises and unregistered businesses fall outside it and have to rely on ordinary contractual interest and civil remedies.
- What can I actually do with the number?
- Two things. Putting the computed figure in a reminder changes the conversation, because it is a statutory liability rather than a request. If that fails, the MSME Samadhaan portal lets a registered supplier file a delayed-payment reference with the Micro and Small Enterprise Facilitation Council in the relevant state.
- Why do I have to enter the bank rate myself?
- Because it changes, and a calculator that quietly uses a stale rate produces a confidently wrong number. Look up the bank rate in force for your period on the RBI website and enter it. If the rate changed during a long overdue period, compute the segments separately.
Last reviewed 2026-09-10. Written and maintained by Kartikeya Mishra.