New MSME payment sections

1. Payment to MSME under section 43B(h)

2. Introduction of Section 43B(h)
Section 145 of Income Tax Act-Income computed under Profit and Gains of business or
profession either cash or mercantile system of accounting
Generally Business-Mercantile System Followed
Profession-Cash System Followed
No Hybrid System
Section 43B-Expenses allowed only on payment basis irrespective of accounting followed
Example-1)ESI/PF, GST
2)Interest on loan from financial institution/Bank
Actually paid before the specified date for furnishing due date of filing return(31st July or 31st
October)

3. Intention of the Introduction of Section 43B(h)
1)Intention of introduction of section 43B(h)- (Page No.12 of Memorandum Explaining the
provisions in the Finance Bill 2023)
(a) In order to promote timely payments to micro and small enterprises, it is proposed to include
payments made to such enterprises within the ambit of section 43Bof the Act-43B(h)
(b) any sum payable to above enterprises 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.
©These amendments will take effect from 01.04.2024 and will accordingly apply to the Assessment
Year 2024-25(FY 2023-24) and subsequent assessment years
(d) 43B fundaments-Prescribed payments and within the due date of filing return and 43B(h) only
within specified due date under section 15 of MSME Act or Financial Year whichever is later.

4. Notification No. S.O 2119(E) dated 26.06.2020
MSME
a) Micro Enterprises:
Investment in Plant and Machinery or equipment –Up to 1 crore
Turnover-Up to 5 crores
b) Small Enterprises:
Investment in Plant and Machinery or equipment–Up to 10 crores
Turnover-Up to 50 crores
c) Medium Enterprises:
Investment in Plant and Machinery or equipment–up to 50 crores
Turnover-Up to 250 crores

5. Notification No. S.O 2119(E) dated
26.06.2020 MSME
d) It is an Manufacturing enterprises or Service enterprises not Trading concern
e) Net Investment (Plant and Machinery)- depreciated cost as per income tax return of plant
and machinery or equipment less cost of pollution control, R&D and Industry safety devices.
f) Export of goods or services or both, shall be excluded while calculating the turnover of any
enterprises.
g) If the enterprises cross the ceiling limits specified for its present category in either of the
two criteria of investment of turnover-placed in the next category.
h) enterprises shall be placed in lowest category if it goes below the ceiling limits specified for
its present category in both criteria of investment as well as turnover.
i) Enterprise has filed Udyam Registration

6. Due date of payment (Section 15 MSMED Act)
b) In no case the period agreed upon between the supplier and buyer in writing shall exceed 45 days
from the day of acceptance or the day of deemed acceptance.
c) Prima facia it appears that 45 days or 15 days is due date but practically in most of sale bill one
condition is give that the bill shall be paid within 7days or 15 days then due date shall be considered as
7 or 15 days only as sale bill will also constitute an agreement.
d) day of acceptance is defined to mean: -
(a) the day of the actual delivery of goods or the rendering of service
(b) where the objection is made in writing by the buyer regarding acceptance of goods or services
within 15 days from the day of the delivery of goods or the rendering of services, the day on which
such objection is removed by the supplier.

7. Due date of payment (Section 15 MSMED Act)
e) If payment is not made within agreed time or on or before the appointed day, then pay
interest as per section 16 of the MSMED Act. ( Three times of the bank rate
notified by the RBI)
3) Traders can get the MSME registration for purpose of Priority sector lending only-
Traders will not be covered under section 43B(h)

8. THANK YOU