MSME Delayed Payment Interest Calculator

When this applies

• You are a supplier and a buyer has paid beyond the statutory period.
• You are a buyer estimating the cost of a delayed payment to a small supplier.
• You are reconciling interest raised under the MSMED Act.
• You are setting payment terms to avoid the statutory interest.

INR 5,00,000 outstanding for 3 months at 18% compounded monthly

1. 1Outstanding INR 5,00,000, rate 18% a year, 3 months.
2. 2Monthly rate = 18 / 12 = 1.5%.
3. 3Compounded amount = 5,00,000 x (1.015)^3 = about INR 5,22,839.
4. 4Interest = 5,22,839 - 5,00,000 = about INR 22,839.

Interest of about INR 22,839 and a total of about INR 5,22,839.

What this calculator does

Work out the compound interest owed on a payment to a micro or small enterprise that was made after the statutory period, and the total now payable.

How this is calculated

Under the MSMED Act, a buyer must pay a registered micro or small enterprise within the period the Act allows. If payment is late, the buyer pays compound interest on the outstanding amount at the statutory rate, compounded monthly. The calculator compounds the amount monthly for the months of delay and shows the interest and the total payable.

The formula

Interest compounds monthly at the statutory rate on the outstanding amount

Common mistakes to avoid

• Using simple interest

  The Act compounds the interest monthly. A simple-interest figure understates what is owed.

• Applying it to an unregistered supplier

  The protection generally turns on the supplier being a registered micro or small enterprise. Check the registration before relying on it.

• Ignoring the allowed period

  Interest runs from the end of the period the Act allows, not from the invoice date. Counting from the invoice overstates the delay.

Frequently asked

What is the MSME payment rule?

A buyer must pay a registered micro or small enterprise within the period the MSMED Act allows. If the buyer fails to pay in time, it pays compound interest on the outstanding amount at the statutory rate.

How is the interest compounded?

Monthly, on the outstanding amount. Compounding is what the Act specifies, which is why the interest is more than a simple-interest calculation would give.

Does it apply to every supplier?

The protection applies to micro and small enterprises as defined, and generally to those registered. The buyer's size and the agreement's terms also matter.

Is the interest automatic?

The Act makes the buyer liable for the interest, but recovering it may require the supplier to raise it. This calculator estimates the amount; recovery is a separate step.

What is the statutory rate?

The rate is set by notification and can change. Enter the rate currently in force, and confirm it before relying on the figure.