MSME Compliance for Indian Businesses
Complete MSME Compliance software for India. MSMED Act 2006 45-day payment tracking, auto compound interest at 3× RBI bank rate, ready-to-file Form MSME-1 half-yearly data, and Section 43B(h) disallowance prevention. Built for CAs and finance teams.
Three Laws Hit You Simultaneously for Late MSME Payments
The MSMED Act 2006, the Companies Act 2013, and the Income Tax Act 1961 all independently penalise delayed payments to MSME suppliers, most buyers don't realise the full exposure until it's too late.
~19.5% Compound Interest
Section 16, MSMED Act: compound interest with monthly rests at 3× RBI bank rate (currently ~6.5% × 3 = 19.5% p.a.) accrues from Day 46. Cannot be waived by contract.
₹20,000–₹3 Lakh Penalty
Section 405(4), Companies Act 2013: failure to file Form MSME-1 attracts ₹20,000 immediately + ₹1,000/day continuing penalty per officer in default. MCA is actively enforcing.
Tax Disallowance Under 43B(h)
Effective AY 2024-25: purchases from Micro & Small Enterprises unpaid beyond 45 days are disallowed as a deduction until actual payment, increasing taxable income by the full invoice value.
Month 2: ₹5,08,125 × 1.625% = ₹8,257 → ₹5,16,382
Month 3: ₹5,16,382 × 1.625% = ₹8,391 → ₹5,24,773
Interest cost: ₹24,773, and not tax-deductible
Everything a CA Needs to Manage MSME Compliance
Invoice Ingestion. Upload or Manual Entry
Upload bills as PDF, image, or Excel. AI-assisted field extraction pulls invoice number, date, amount, and supplier name. Manual entry form for ad-hoc invoices. Mark suppliers as Udyam-registered (Micro/Small/Medium) once, applies to all future invoices automatically.
45-Day Clock and Payment Deadline Alerts
For every Micro or Small Enterprise invoice, dcomply auto-sets the "appointed day" (acceptance date + 15 days where no agreement; acceptance date + up to 45 days under written agreement). Alerts at 30 days, 40 days, and on Day 44, before interest starts.
Exact Compound Interest Calculator (Sec 16)
Calculates A = P × (1 + r/12)n with monthly rests, using the prevailing RBI bank rate at each monthly interval. Handles partial months, multiple rate changes within a period, and part-payments mid-way. Shows principal + interest breakdown and daily accrual rate.
Form MSME-1 Auto-Population and Export
At each half-year close (September 30 and March 31), dcomply compiles the MSME-1 return data: CIN, supplier PAN, outstanding amount, due date, and reason for delay. Exports in MCA-compatible format. Tracks both pending-at-period-end AND payments delayed during the period (per July 2024 amendment).
Section 43B(h) Tax Disallowance Tracker
Flags invoices from Micro and Small Enterprises (not Medium) where payment may breach the 45-day window before financial year end. Shows the exact deduction at risk for each outstanding invoice so CFO and CA can prioritise clearance before March 31.
Supplier MSME Register with Udyam Verification
Maintain a registry of all MSME-registered suppliers with Udyam Registration Number, classification (Micro/Small/Medium), registration date, and NIC code. Distinguishes Micro and Small (covered by Sec 43B(h) and MSME-1) from Medium (exempt from Sec 43B(h) but still subject to interest). Bulk import via Excel.
Who Must File Form MSME-1 and When
Form MSME-1 is not just for large corporates, any company registered under the Companies Act that buys from Micro or Small enterprises is in scope.
Even if dues are cleared before period-end, companies must still file MSME-1 if a payment breach (beyond 45 days) occurred during the half year. No more "pay before March 31 to avoid filing" strategy.
Which companies must file?
All companies incorporated under the Companies Act 2013 (Private Limited, Public Limited, OPC, Section 8, etc.) that receive goods or services from Micro or Small Enterprises. LLPs, partnerships, and proprietorships are currently excluded, this is specifically a corporate obligation.
Filing threshold?
No minimum threshold amount. Any outstanding payment to a Micro or Small supplier that is overdue beyond 45 days triggers the obligation, even a single invoice of ₹10,000 must be reported.
Due dates (half-yearly)?
April 30, for period October 1 to March 31.
October 31, for period April 1 to September 30.
Filed on MCA21 portal. Digital signature of director required.
Nil return required?
If no payment to any Micro or Small supplier exceeded 45 days at any point during the half year, no filing is required. dcomply auto-confirms nil-filing eligibility based on payment records.
New MSME classification (from April 1, 2025)
Micro: Investment ≤ ₹2.5 Cr AND Turnover ≤ ₹10 Cr. Small: Investment ≤ ₹25 Cr AND Turnover ≤ ₹100 Cr. Medium: Investment ≤ ₹125 Cr AND Turnover ≤ ₹500 Cr. More of your suppliers now qualify, update your MSME register before the next filing.
Penalty for non-filing?
Under Section 405(4) of the Companies Act 2013: Company. ₹20,000 initial + ₹1,000/day (max ₹3 lakh). Each officer in default, same. MCA has imposed penalties up to ₹18.58 lakh per company across multiple periods (M/s Blissful Garments case). Criminal prosecution possible after 90 days.
Why CAs Say This Is Genuinely Difficult
Unlike a simple filing deadline, MSME-1 compliance requires tracking hundreds of invoices, computing legally-prescribed compound interest, and proving supplier MSME status, all manually today.
Hundreds of Invoices, Per Client
A mid-size manufacturing company may have 200–500 MSME supplier invoices per half-year. Tracking the 45-day clock on each in Excel is impractical and error-prone.
Compound Interest is Non-Trivial
Monthly rests + variable RBI rate + part-payments means the interest formula has 3 moving variables. CAs frequently get this wrong, creating under-reported liability that surfaces in litigation.
Supplier MSME Status is Uncertain
Suppliers may not volunteer their Udyam Registration status. If a supplier registers mid-year, obligations change retroactively. CAs need a verification workflow, not just a static list.
Acceptance Date vs Invoice Date
The 45-day clock runs from the "date of acceptance" (or deemed acceptance after 15 days), not the invoice date, a distinction most ERP systems don't track, making the correct due date hard to determine.
Multi-Client CA Practices
A CA firm managing 15–30 corporate clients must track MSME-1 for each across two periods per year. Each client has different suppliers, payment terms, and ERP exports, no consolidated view exists today.
43B(h) Hits Unexpectedly at Year-End
Section 43B(h) disallowances discovered in March, after the books are closed, mean a significant unexpected tax liability with no time to fix. The penalty is the full invoice value added back to taxable income.
Complete MSME Compliance in One Module
From invoice upload to MSME-1 submission, every step is covered, with full audit trail for litigation defence.
Udyam supplier registry with classification history
Store each supplier's Udyam Registration Number, NIC code, and Micro/Small/Medium classification. Track reclassification events so historical periods use the correct status.
Acceptance-date-aware 45-day clock
Input both invoice date and acceptance date separately. If acceptance date is not known, the system applies deemed acceptance (invoice date + 15 days) per Section 2(b) of the MSMED Act.
RBI bank rate history table (auto-updated)
dcomply maintains a built-in RBI bank rate history table. The compound interest calculator automatically applies the correct rate for each monthly interval, no manual rate lookup required.
Part-payment handling with interest rebase
When a partial payment is recorded, the calculator rebases the principal and continues compounding on the reduced amount, matching the legally correct computation method.
Reason codes for MSME-1 (MCA-mapped)
Pre-mapped reason codes for payment delay matching MCA's Form MSME-1 dropdown: dispute, cash flow, banking delay, force majeure, and others, ensures your filing passes MCA validation.
MSME Samadhaan dispute tracker
If a supplier files a complaint on the MSME Samadhaan portal, log the reference number, conciliation status, and facilitate production of interest computation as evidence, the same calculation this module performs.
Exactly What Form MSME-1 Requires. Auto-Populated by dcomply
Company-Level Fields
- Corporate Identification Number (CIN)
- Company PAN
- Registered Name and Address
- Email ID of authorised signatory
- Reporting period (Half-year)
Per-Supplier Fields (repeated for each overdue supplier)
- Name of MSME supplier
- PAN of MSME supplier
- Total outstanding amount (₹)
- Date from which amount is due
- Reasons for delay in payment
Post-Payment Disclosure Also Required
Under Section 22 of the MSMED Act, companies must also disclose in their annual financial statements: (a) the principal amount and interest due to MSME suppliers remaining unpaid at year-end; (b) interest paid during the year under Section 16; (c) the amount of interest due for delayed payments paid after the appointed day but during the year; (d) further interest remaining due. dcomply generates this Schedule to Financial Statements automatically from payment records.
MSME Compliance. FAQ
MSMED Act, Form MSME-1, Section 43B(h), all in one place.
Stop Letting MSME Dues Become a Legal Crisis
dcomply's MSME Compliance module gives CAs and finance teams a complete, legally-precise toolkit, from the first invoice to the Form MSME-1 submission.