J. D. Shah Associates
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Legal provision - Section 43B(h) 43B(h) any sum payable by the assessee to a micro or small enterprise beyond the time limit specified in section 15 of the Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006), shall be allowed (irrespective of the previous year in which the liabil
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FAQ :
Section 43B(h) states that any sum payable to a micro or small enterprise beyond the time limit specified in Section 15 of the MSMED Act, 2006, will only be allowed as a deduction in the year it is actually paid, not when the liability was incurred.
This clause applies to all purchases and expenses made from enterprises registered under the MSMED Act, 2006, specifically those classified as Micro & Small Enterprises. Medium Scale Enterprises are not included.
The MSMED Act mandates payment within the time specified in a written agreement, which cannot exceed 45 days. If there's no written agreement, payment must be made within 15 days.
If payment to a Micro & Small Enterprise is not made within the specified time, the amount is added to your taxable income in the previous year due to non-payment, and you will bear the tax liability on it. The deduction is then claimed in the year of actual payment.
Businesses should verify if vendors are registered with MSME, categorise them accordingly in their accounting system, check outstanding bills, and ensure payments are made within the due dates to avoid disallowance. Special attention should be paid to bills received late in the financial year.
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