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Over the last few years, the MSME sector has grown and today it forms the backbone of the Indian economy. Statistics reveals that about 1/3rd of the India’s manufacturing output is contributed by MSMEs. MSMEs account for nearly half of India’s exports. Naturally, the Government is focused on encouraging and protecting the MSMEs. It has taken innumerable measures to strengthen the financial accessibility of MSMEs. However most of the changes made in the reporting requirements for people dealing with MSME’s as well as the levy of Interest at 3 times the bank rate under the MSMED Act , have not met the desired results.


Finance Act 23 aims to make a further attempt to try and ensure MSME’s get their payments in time so that their creditworthiness is not affected.


Finance Act, 2023 has thus inserted a new clause (h) to section 43B, with effect from 1 April, 2024 (assessment year 2024-2025) so as to provide that 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 (MSMED) Act, 2006 shall be allowed as deduction only on actual payment. Thus, the amendment to section 43B of the Act will allow the payment as deduction only on payment basis if paid beyond the due date under the MSMED Act, 2006.


However, this provision has raised a lot of doubts as to the interpretation and applicability. It has further faced resistance from the business sector dealing with the MSME’s as it is likely to put pressure on their working capital requirements and disturb their normal business work environment. A lot of questions have been raised about the due date under the MSMED Act, 2006 and its applicability to the new clause inserted under Sec 43B. A few innovative suggestions have also been seen in an attempt to circumvent the new provisions.


This book is written with the objective to discuss with the professionals , the Amendments in Income Tax Act as well as the applicable sections of the MSMED Act, 2006 (relevant extracts of the Bare Act have been given) , the applicable notifications and interpretational issues have also been addressed with FAQ’s and opinions and suggestions. I have also tried to simplify the dates with charts and illustrations for further clarity. Further there is some discussion on possible safeguards suppliers and buyers could take.


I hope the professionals will find the book useful to provide consultancy to their clients.

Sec 43B(h) - A Discussion

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