Clause 22 of Form 3CD – the rewritten MSME disclosure, and exactly how to compile the three figures it now demands.
The old clause asked one question (interest inadmissible under the MSMED Act). The substituted clause – applicable for AY 2026-27 audits – asks three, and the third one is the section 43B(h) disallowance your client will feel. Pre-2025 checklists do not have this.
What the substituted clause 22 requires
| Part | What must be reported | Where the number comes from |
|---|---|---|
| (i) | Interest inadmissible under section 23 of the MSMED Act | Section 16 compound interest (3x the RBI bank rate, monthly rests) accrued on delayed payments to micro/small suppliers – paid or payable, it is permanently disallowed. |
| (ii) | Total amount REQUIRED to be paid under section 15 MSMED during the year | All invoices from Udyam-registered micro/small (non-trader) suppliers raised in the year – the base for the split below. |
| (iii) | Split of (ii): (a) paid WITHIN the section 15 time limit; (b) NOT paid within the limit | Part (b) is the section 43B(h) inadmissible amount – deduction only in the year of actual payment. |
Compiling the figures – the auditor’s working
1. Identify the covered suppliers
Micro and small enterprises with Udyam registration (safer view: registered before the supply). Medium enterprises are outside. Traders registered on Udyam are generally outside too, per the MSME Ministry office memorandum – verify the ACTIVITY on each certificate, apply a consistent position and document it. Our 43B(h) checker runs these tests one supplier at a time.
2. Apply the section 15 window per invoice
15 days from acceptance with no written agreement; up to 45 days by written agreement (longer terms read down to 45). Deemed acceptance runs 15 days from delivery unless a written objection was raised. Remember the year-end nuance: a March invoice whose window ends in April keeps its accrual deduction if paid within the window.
3. Compute the interest for part (i)
Compound, monthly rests, at 3x the bank rate in force – which changed five times between February 2023 and December 2025 (16.50% currently). A single-rate shortcut misstates the number; the MSME interest calculator computes it period-correct and prints the ledger.
Interplay the auditor must keep straight
| Provision | Effect |
|---|---|
| Section 15 MSMED | Payment window: 15 days, or up to 45 by written agreement. |
| Section 16 MSMED | Compound interest at 3x bank rate on delay – runs until actual payment. |
| Section 23 MSMED | That interest is NEVER deductible – clause 22(i). |
| Section 43B(h) IT Act | Principal paid beyond the window: deduction shifts to the payment year – no ITR-due-date relief – clause 22(iii)(b). |
| Section 22 MSMED + Schedule III | Five-point disclosure of principal and interest due in the buyer’s financial statements. |
| MCA MSME Form 1 | Companies: half-yearly return of dues outstanding beyond 45 days (Apr-Sep by 31 Oct; Oct-Mar by 30 Apr). |
Audit season is here – run the whole file from one workbook
The clause-wise Form 3CD checklist Excel carries a clause 22 annexure that pairs with the MSME ageing file – engagement to sign-off in one place.
Download the 3CD Checklist Excel