The financial year 2023-24 is about to end, so all taxpayers who purchase goods or services from MSME registered MICRO and SMALL manufacturers and service providers are required to make payment within 45 days or if there is no agreement, then the payment is to be made within 15 days. Under this provision, even if 45 days or 15 days have passed but the payment is made during the financial year, there is no problem in getting the expenditure in this Financial Year itself. Hence this 31st March 2024 is very important for all the Taxpayers.
Read This Article in Hindi: आयकर धारा 43बी(एच) को लेकर अभी आपको क्या करना है
See, there is always a shortage of funds with all the Taxpayers, so at this time, it is necessary to make those payments first, failure to make which will lead to negative effects of 43(B)(h), so let us see what you need to know in this regard so that you can utilize the available funds at this time in a way to avoid any negative impact of Section 43(B)(h) and after that you can manage the rest of your finances: –
1. First of all, you should note that if you have to see which payment are necessary under Section 43 (B) (h), then your own status does not matter and for this you will have to see the status of the dealer who is your seller or vendor. That means it does not matter whether you are a manufacturer, trader, or a micro and small unit, a Medium or Big Unit . For the purpose of this section 43 (B) (h) have to check the status of your seller.
2. Section 43 (B)(h) is applicable to you only in relation to those sellers who are registered as manufacturers or service providers under Small and Micro category in MSME, so at this time you do not have to make payment to traders and medium units registered under MSME. You can check the status of the sellers on the MSME portal through thier Udhyam Aadhaar number.
3. Those vendors who are not registered under MSME are not covered under this section, hence at present they are not required to make payment under this section.
4. Your sellers who are registered in MSME but are registered in Traders category, then these sellers are not covered under this section, hence at present they are not required to be paid under this section 43(B)(h).
5. The Sellers who are registered in MSME and are also manufacturers but are in the medium category then there is no need pay at present on urgent basis to avoid the negative impact of this section 43(B)(h) . Medium category means investment in plant and machinery of more than Rs 10 crore or turnover of more than Rs 50 crore.
6. If you are covered under Section 44AD of Income Tax and are going to file your return declaring your income as 8% or 6% of your turnover, as the case may be, then you are not covered under this section and at present you do not have to pay anyone under Section 43(B)(h).
7. If you have not purchased any goods or services from the seller but have purchased fixed assets or capital goods, then those sellers are also not covered under this section regarding these purchases of Fixed Assets and Capital Goods, hence at present they are not required to be paid under this section.
8. Here, it should be kept in mind that the supplies of the dealers covered under this section whose 45 days have been completed on or before March 31, must be paid by March 31, 2024 to avoid any addition due to Section 43(B)(h).
9. Also keep in mind here that if 45 days have not passed since the supply of the dealers covered under this section up to 31st. March 2024 but the supply has been made by March 31, 2024, then the payment should be made within 45 days from the date of supply. Try to understand this through an example:-
10. Suppose you have received the supply on 28th February 2024, then on 31st March 45 days have not yet been completed, but since this expenditure has been incurred in the financial year 2023-24, hence to claim this expenditure in FY 2023-24, this payment has to be made around 13th April 2024 or before this date otherwise this expenditure will not be available in the financial year 2023-24 i.e. it will be added to your income and you will have to pay tax on it and this expenditure will be available in the financial year in which it is paid i.e. if this payment is made on 20th April 2024 then its exemption will be available in the financial year 2024-25 but it will be added to your income of the financial year 2023-24 and tax is also required to be paid in the FY 2023-24.
Let us now see how Section 43(B)(h) will be affected if you buy goods from dealers covered under this section after April 1, 2024. According to Section 15 of the MSME Act, this payment should be made within 45 days, but according to Section 43(B)(h) of the Income Tax, even if this payment is made by 31 March 2025, its exemption will be available in the financial year 2024-25. .
11. Let us now see how these 45 days will be calculated. First of all, check that if the actual delivery of the goods is free from objection, that is, there is no objection from the recipient’s side, then 45 days will be calculated from the actual delivery of the goods. If the buyer of the goods has lodged an objection in writing within 15 days of delivery, then 45 days will be counted from the day the seller resolves the objection.
12. Another question that is being asked continuously is whether this provision interferes with the freedom to make private contracts between two parties? Can’t two parties jointly do business on the condition of 90 days payment? Maybe you are right but right now you have to follow this 45-day law. Maybe someday this issue will arise in some Hon. Court of law and a decision will be taken but at this time this is the law and you have to follow it. There is no option for this at present.
Simple Agreement Sample: 45-Day Window for Section 43(B)(h) Purchases Without Prior Arrangement
If you have not made any agreement with your seller, then here we are giving you a sample of a simple agreement which can be made even on a letter head, then you will get 45 days’ time for 43(B)(h) and This time is very important for you for purchases made at the end of the financial year.
From,
MSME COMPANY (YOUR SUPPLIER/SELLER )
JAIPUR
To,
THE ABC TRADING COMPANY (PURCHASER MEANS YOU)
AJMER
Sub:- DECLARATION FOR APPLICABILITY OF SECTION 43B(h) of the INCOME TAX ACT, 1961 BY A MSME – MICRO AND SMALL.
With reference to above we have to state as under :-
| S.NO | PARTICULARS | SUBMISSION |
| 1. | Udhyam Adhar Number | XXXXXXXXXXXXXX |
| 2. | Type of Unit | Manufacturer/Service Provider* |
| 3. | Scale of the Unit | Micro/ Small** |
| 4. | Whether I/We are agreeing for 45 days payment for all your supply during the Year. | I am agreeing on the Terms of payment of 45 days through this Letter. This letter should be construed as an Agreement in this respect. |
Thanking You
Yours etc.
FOR MSME COMPNY
( PROP. )
*Traders, if they are supplier , Section 43B(h) not applicable.
** Medium Industires, if they are supplier , Section 43B(h) is not applicable.
Note :- Tick the Appropriate Entry.
What’s MSME
SEE IT FOR YOUR SELLER
Revised Classification applicable w.e.f 1st July 2020
Composite Criteria: Investment in Plant & Machinery/equipment and Annual Turnover
| CLASSIFICATION | MICRO | SMALL | MEDIUM |
| Manufacturing Enterprises and Enterprises rendering Services | Investment in Plant and Machinery or Equipment: Not more than Rs.1 crore and Annual Turnover ; not more than Rs. 5 crore |
Investment in Plant and Machinery or Equipment: Not more than Rs.10 crore and Annual Turnover ; not more than Rs. 50 crore |
Investment in Plant and Machinery or Equipment: Not more than Rs.50 crore and Annual Turnover ; not more than Rs. 250 crore |
CHECK THE STATUS OF YOU SELLER
Visit: https://sambandh.msme.gov.in/PPP_Vendor_Registration_Status.aspx
Author: Sudhir Halakhandi | Sudhirhalakhandi@gmail.com
Author Bio
Thanks for writing such a good article.