Section 43B(h): Definition, Meaning & Guide for Indian Businesses

Section 43B(h) of the Income Tax Act requires buyers to pay MSME suppliers within 45 days or lose the expense deduction for that financial year.

What is Section 43B(h)?

Section 43B(h) was inserted into the Income Tax Act by the Finance Act 2023 and is effective from FY 2023-24. It says any amount payable to a registered Micro or Small enterprise is allowed as an expense deduction only when actually paid, OR within the time limit specified under Section 15 of the MSMED Act 2006 (which is 45 days with a written agreement, 15 days without). If you pay after the deadline, the expense gets disallowed for the financial year, increasing your taxable income. The expense is allowed in the year of actual payment, so the deduction is deferred not lost. But the cash impact on the current year's tax bill can be significant. Use the free Section 43B(h) compliance checker at indiacrm.in/tools/section-43bh-checker to identify at-risk payments.