Changes to Section 43B of Income Tax Act – Payment to MSME

New clause (h) is proposed to be inserted to Section 43B of Income Tax Act, 1961 vide Union Budget 2023 namely :

Any sum payable to micro or small enterprise beyond the time limit specified in sec. 15 of MSMED. (Note that medium enterprise  are not covered)

Shall be allowed on actual payment basis.

Please note that proviso relating to payment made on or before due dates of return filling U/S 139(1) is not applicable here.

That means even if you made payment before filling your return U/S 139(1) but after dates specified in Sec. 15 of MSMED it will be disallowed and will allowed in previous year in which payment made.

As per sec.15 of MSMED:

Liability of buyer to make payment on or before the date agreed upon between him and the supplier in writing or where there is no agreement in this Behalf before appointed date.

Provided that in no case the period agreed upon between the supplier and the buyer in writing shall exceed 45 days from days of acceptance or day of deemed acceptance.

If there is no agreement than payment is to be made before appointed date.

Appointed date as per act is day following immediately after the expiry of 15 days from the day of acceptance or the day deemed acceptance of any goods or any services by buyer from supplier.

The day of deemed acceptance is where no objection is made in writing by buyer regarding acceptance or goods or services within 15 days from date of delivery of goods or rendering of services the day of actual delivery of goods or the rendering of services.

Now how we can extend the date of payment: 

We have to suggest assesses to enter in agreement for making payment within 45 days so he can claim the deduction u/s 43B in same year of accruals even payment of March is made after 15 days.