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With new clause in Income Tax Act Auditors need to verify timely payment to MSE

Updated: May 30, 2023 04:31:33pm

With new clause in Income Tax Act Auditors need to verify timely payment to MSE

New Delhi, May 30 (KNN) The new sub-clause 43B(h) of the Income Tax Act, 1961 introduced in the Finance Act, 2023 during Budget relates to payment in respect of Micro and Small Enterprises (MSE) beyond the time limit specified in section 15 of MSME Act, 2006.

Auditors have the responsibility to verify that Micro and Small Enterprises (MSEs) suppliers are paid in time as the operative clause introduced by the Finance Minister becomes effective from the financial year 2023-2024.


If no credit period is agreed, the payment should be effected to MSE within 15 days from the date of supply of goods / services by the MSE Parties.

The payment should be effected to MSE on or before the credit period, if the credit period is less than 45 days.

If the credit period is more than 45 days, the payment should be effected within 45 days.

In case the payment is not made within 15 days, or as the case may be, within 45 days, the expenses in respect of purchase of goods & service availed will be disallowed in the memo accordingly the taxable income will be more.

If payment is made (after 15 days or after 45 days) the above disallowed expenses shall not be claimed as deduction, in the year of payment.

This provision is applicable to both the tax audit assessee and non-tax audit case assessee.

To avoid disallow or additions ensure the payment is effected within the aforesaid period.

It is also a requirement to classify sundry creditors as Micro, Small & Medium Enterprises.

For this purpose, you are further required to obtain the valid MSME certificate from the suppliers.  (KNN Bureau)


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