Under Section 43B(h) of the Income Tax Act, any sum payable by an assessee to a Micro or Small enterprise beyond the time limit specified in Section 15 of the MSMED Act, 2006 is disallowed as a business deduction in the year of incurrence and added back to taxable income.
1. Statutory Payment Timelines
- With Written Agreement: Payment must be executed within maximum 45 days from delivery/invoice.
- Without Written Agreement: Payment must be made within 15 days from acceptance of goods/services.
2. Strict Exclusions from Section 43B(h)
- Medium Enterprises: Only Micro (investment ≤ ₹1 Cr, turnover ≤ ₹5 Cr) and Small (investment ≤ ₹10 Cr, turnover ≤ ₹50 Cr) entities are covered.
- Traders & Retailers: Wholesale and retail traders holding Udyam certificates for priority sector lending are officially excluded by MCA/CBDT clarifications.
- Presumptive Taxation: Businesses filing under Section 44AD or 44ADA are exempt from Section 43B(h) disallowances.
Leave a Comment