FY 2025-26 (AY 2026-27) – INCOME-TAX ACT 1961
Check whether section 43B(h) hits a supplier payment – and exactly which year the deduction lands in.
Answers the questions the articles skip: traders, medium enterprises, Udyam Assist certificates, the 15-vs-45-day window, and the March invoices that spill into April. Enter one payment situation and get the verdict with the deduction year named.
Section 43B(h) Applicability Checker
Check the actual certificate – registration should exist before the supply.
Limits from 1-4-2025: Micro up to Rs 2.5 cr investment + Rs 10 cr turnover; Small 25 + 100; Medium 125 + 500.
Deemed accepted if no written objection within 15 days of delivery.
The 43B(h) misconceptions, answered
Does paying before the ITR due date save the deduction?
No – this is the biggest trap. Unlike clauses (a) to (g) of section 43B, clause (h) has NO return-due-date relief. Miss the section 15 window and the deduction moves to the year of actual payment, full stop.
Must every March invoice be paid by 31 March?
No – the panic is overdone. An invoice accepted on 25 March with no written agreement is due by 9 April; pay it by then and the deduction stays in the accrual year even though payment happened after year-end. The test is the section 15 window, not the year-end date.
Are medium enterprises covered?
No. Section 43B(h) reaches only micro and small enterprises. A supplier whose certificate says Medium is outside it – though commercial interest terms may still apply.
What about traders registered on Udyam?
Per the MSME Ministry office memorandum, wholesale/retail traders are registered on Udyam only for priority-sector-lending benefits – so they are generally treated as outside section 43B(h). There is no CBDT circular on this yet, so some professionals advise caution; apply a consistent, documented position.
Does it apply to unregistered suppliers?
No – the section rides on the MSMED Act definitions, which require Udyam registration (and the safer view is registration before the supply). An unregistered vendor is outside 43B(h) even if factually tiny.
Is a Udyam Assist certificate the same as Udyam?
Not for this purpose. Udyam Assist covers informal micro enterprises for priority-sector lending; the cautious position treats UAP-only suppliers as outside 43B(h) until they hold full Udyam registration.
Is 45 days always the limit?
Only with a written agreement – and even then section 15 caps it at 45 days from acceptance. With no written agreement the limit is just 15 days. Purchase-order terms printed on the PO usually count as a written agreement.
Does 43B(h) cover capital expenditure?
Section 43B disallows deductions otherwise allowable – a capital purchase is not a P&L deduction, so 43B(h) does not bite (depreciation is unaffected). It also does not rewrite opening balances: amounts already outstanding on 1 April 2023 were outside the first year of the provision.
Is the interest on late payment deductible at least?
Never. Interest under section 16 of the MSMED Act – compound, at 3x the RBI bank rate, currently 16.50% – is permanently disallowed by section 23. It is reported in clause 22 of Form 3CD and keeps accruing until actual payment.