What is the 45-day rule?

Under section 15 of the MSMED Act 2006, a buyer must pay a micro or small enterprise by the date agreed in writing, and that agreed date can never be more than 45 days after the goods or services were accepted. If nothing was agreed in writing, the deadline is shorter: 15 days from acceptance. A purchase order promising 90-day credit does not extend either limit.

What if we never agreed payment terms in writing?

Then the buyer has 15 days, not 45. Section 15 sets 15 days from acceptance as the default where there is no written agreement. Verbal understandings and terms that only appear on your own invoice usually do not count as a written agreement, so check what was actually signed or exchanged.

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. Retail and wholesale traders registered on Udyam are generally treated as outside the delayed-payment provisions too. Anyone outside the Act relies on contractual interest and ordinary 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.

Late payment interest calculator

Enter the unpaid amount, the acceptance date, whether payment terms were agreed in writing, and the RBI bank rate. This computes the appointed day under section 15 (15 days without a written agreement, at most 45 with one) and the compound interest owed under section 16 of the MSMED Act.

How the calculation works

Three numbers drive it. First the appointed day: with no written agreement it is 15 days after acceptance; with one, it is the agreed date, but never more than 45 days after acceptance. Everything after that day is overdue. Second the rate: three times the RBI Bank Rate, so a Bank Rate of 5.75% produces 17.25% a year. Third the compounding, which runs monthly rather than annually, and that is what makes long delays expensive.

Monthly rests compound faster than most people expect. On a 1,00,000 invoice at a 5.75% Bank Rate, a delay of one year adds about 18,681, against 17,250 under simple interest. Two years adds about 40,853. The gap widens the longer it runs.

The 15-day default catches more suppliers than the 45-day ceiling does. If you never signed payment terms, your buyer was late from day 16, not day 46.

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 micro or small enterprise by the date agreed in writing, and that agreed date can never be more than 45 days after the goods or services were accepted. If nothing was agreed in writing, the deadline is shorter: 15 days from acceptance. A purchase order promising 90-day credit does not extend either limit.
What if we never agreed payment terms in writing?: Then the buyer has 15 days, not 45. Section 15 sets 15 days from acceptance as the default where there is no written agreement. Verbal understandings and terms that only appear on your own invoice usually do not count as a written agreement, so check what was actually signed or exchanged.
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. Retail and wholesale traders registered on Udyam are generally treated as outside the delayed-payment provisions too. Anyone outside the Act relies on contractual interest and ordinary 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 2026-10-19. Written and maintained by Kartikeya Mishra.