– This section pertains to deduction allowances specifically related to payments made to Micro and Small Enterprises (MSEs). – It ensures that certain deductions are allowed only on actual payment basis.

What is Section 43B(h)?

By: ca manisha fatarpekar

– The new insertion of clause (h) in Section 43B is a Socio-Economic Welfare Measure. – It aims to ensure timely payments are realized by micro and small enterprises. – Compliance with this provision is crucial for taxpayers and auditors alike.

Why are we discussing this at this time of the year?

– If an amount remains unpaid beyond the specified time limit (e.g., 45 days or as mutually agreed upon), it will be disallowed for tax purposes. – This provision encourages prompt payment to MSEs, promoting their financial stability.

What are General Malpractices and Disallowed Expenditure:?

Six Cases when your business expenditure is not disallowed under 43B (h)

Clear Guidance for Businesses Dealing with Micro & Small Enterprises

By: ca manisha fatarpekar

Dont miss points  5 & 6

Case 1: Your Supplier Is a Medium Enterprise

You need to ask recent MSME registration certificate from your supplier & verify his status on portal 

https://udyamregistration.gov.in

You need to ask recent MSME registration certificate from your supplier & verify his status on portal https://udyamregistration.gov.in

Case 2: When your supplier is Retail and wholesale trader:

Case 3: If supplier is not registered under MSMED Act at the time of supply of Goods/Services

You need to ask recent MSME registration certificate from your supplier & verify his date of registration under MSME Act.

Case 4: When there is Purchase of Capital Goods

Depreciation Amount on capital goods will not be disallowed even if payment is not made within stipulated time mentioned under MSME Act

Case 5: If there's a written agreement outlining a credit period, payments to suppliers must be made within that period, which must not exceed 45 days as specified in the MSME Act.

Case 6: Where there is no agreement with supplier outlining a credit period , payments to suppliers must be made within period of 15 days from date of delivery of goods / services as specified in MSME Act.

Bonus Tip

When you give someone a cheque, the payment date is typically when you hand over the cheque to them. But to avoid any issue with the tax authorities in future, it's important to make sure the money is actually taken out of your account within a certain timeframe.