MSME Interest Calculator

Why Contractors Lose Money Here

Under the Micro, Small and Medium Enterprises Development Act 2006, a registered MSME supplier is entitled to compounded monthly interest at three times the RBI-notified bank rate on any payment a buyer delays beyond 45 days from acceptance of goods/services (or the agreed period, if shorter). Delayed payment itself happens for the usual reasons — client cash flow, certification delays, dispute over billed quantities — but the interest entitlement exists specifically to compensate the MSME supplier for that delay, regardless of the client's reason. Most MSME contractors either aren't Udyam-registered, or are registered but never invoice clients for the statutory interest.

Real Site Example

A registered MSME contractor with ₹15 lakh overdue for 60 days beyond the 45-day limit, at a typical 3x bank rate of roughly 25.5% p.a. compounded monthly, is entitled to a meaningful five-figure interest amount — money that is legally owed but almost never actually collected.

Professional Best Practices

Registered MSME contractors track payment due dates against the 45-day statutory limit explicitly, and include the interest claim in their overdue payment follow-up rather than only chasing the principal amount.

Engineering Checklist

• Confirm Udyam registration is active — the entitlement does not apply without it
• Track payment due dates against the 45-day statutory limit, not just the invoice date
• Invoice for statutory interest alongside the principal, not as an afterthought
• Use monthly compounding, not simple interest, when calculating what is owed
• Escalate to the MSME Samadhaan portal if direct invoicing does not resolve PSU/government delays

Government & Standards References

• MSMED Act 2006, Section 15 — payment due within 45 days
• MSMED Act 2006, Section 16 — compound interest at 3x bank rate on delayed payment
• MSME Samadhaan portal — statutory escalation route for unpaid claims

How Experienced Contractors Handle This

Registered MSME contractors track payment due dates against the 45-day statutory limit explicitly, and include the interest claim in their overdue payment follow-up rather than only chasing the principal amount.