Rishibhardwaj
KF Rookie
Payments to MSMEs have to be made by 31st March 2024 to ensure Sec 43B(h) compliances:
To claim a deduction for a payment to an MSME, the payment must be made within the timeframe specified in the MSMED Act, which is typically 15 days.
If the payment is made late, the deduction will not be allowed until the following assessment year. This amendment only applies to payments made to MSMEs that are registered with the Udyam portal.
Businesses that make payments to MSMEs should be aware of this new amendment to ensure they are claiming deductions correctly. To comply, businesses should: Make payments to MSMEs within the specified timeframe.
The following checklist is useful to ensure timely compliance: Comprehensive Year-End 43B(h) Checklist:
1. Initiate communication with all vendors to confirm their MSME status and obtain their Registration Certificates for the fiscal year 2023-24. If there’s no response, review their Invoices, Purchase Orders, etc., where they may have indicated their MSME status.
2. Determine whether vendors qualify as Small or Micro enterprises. Note that if they fall under the ‘Medium’ category, 43B(h) does not apply.
3. Identify whether vendors are engaged in trading, manufacturing, or providing services. If they are ‘traders,’ 43B(h) does not apply.
4. Verify whether payments made to vendors pertain to “Capex” items. If so, 43B(h) is not applicable.
5. Check for any existing written contracts regarding payment terms. If none exist, consider establishing written agreements with vendors.
6. Determine the due date, which is calculated from the date of goods/services delivery, acceptance, or deemed acceptance ( 15/45 days from such date ).
7. Ensure timely payment by issuing a cheque on or before the due date, which will be considered the ‘date of payment.’
8. Review any advance payments made to MSEs and consider deducting them under section 43B, even if they are not reflected in the Profit and Loss Account.
9. Ensure that no interest is payable to MSMEs, as such interest is disallowed.
To claim a deduction for a payment to an MSME, the payment must be made within the timeframe specified in the MSMED Act, which is typically 15 days.
If the payment is made late, the deduction will not be allowed until the following assessment year. This amendment only applies to payments made to MSMEs that are registered with the Udyam portal.
Businesses that make payments to MSMEs should be aware of this new amendment to ensure they are claiming deductions correctly. To comply, businesses should: Make payments to MSMEs within the specified timeframe.
The following checklist is useful to ensure timely compliance: Comprehensive Year-End 43B(h) Checklist:
1. Initiate communication with all vendors to confirm their MSME status and obtain their Registration Certificates for the fiscal year 2023-24. If there’s no response, review their Invoices, Purchase Orders, etc., where they may have indicated their MSME status.
2. Determine whether vendors qualify as Small or Micro enterprises. Note that if they fall under the ‘Medium’ category, 43B(h) does not apply.
3. Identify whether vendors are engaged in trading, manufacturing, or providing services. If they are ‘traders,’ 43B(h) does not apply.
4. Verify whether payments made to vendors pertain to “Capex” items. If so, 43B(h) is not applicable.
5. Check for any existing written contracts regarding payment terms. If none exist, consider establishing written agreements with vendors.
6. Determine the due date, which is calculated from the date of goods/services delivery, acceptance, or deemed acceptance ( 15/45 days from such date ).
7. Ensure timely payment by issuing a cheque on or before the due date, which will be considered the ‘date of payment.’
8. Review any advance payments made to MSEs and consider deducting them under section 43B, even if they are not reflected in the Profit and Loss Account.
9. Ensure that no interest is payable to MSMEs, as such interest is disallowed.
