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How to read section numbers: s.80C→s.123 means Section 80C of the Income-tax Act, 1961 is now Section 123 of the Income-tax Act, 2025 (in force from 1 April 2026). Returns for FY 2025-26 still use the old numbers; Tax Year 2026-27 onwards uses the new ones. Section Finder
Who is covered
- Supplier must be a micro or small enterprise registered under the MSMED Act (Udyam) — medium enterprises are not covered
- Supplier must be a manufacturer or service provider; traders registered on Udyam are outside these payment rules
- The buyer can be any business; presumptive-scheme buyers computing income at a deemed rate are practically unaffected
Year-end effect
An invoice of February unpaid by the deadline is disallowed in that year and allowed in the year of payment. Most impact shows on 31 March balances — check creditor ageing before closing the books.
Worked example
Example
Example: A manufacturer in Jind buys parts from a small Udyam unit on 10 March 2026 with a 45-day agreement. Payment made on 5 May 2026 is late (45 days end 24 April) — the ₹8 lakh is disallowed for FY 2025-26 and allowed in Tax Year 2026-27.
Common mistakes
- Not asking suppliers for their Udyam certificate
- Assuming traders are covered
- Ignoring the issue in the tax-audit report
Frequently asked questions
No. For MSME dues, payment within the 15/45-day window matters — not the ITR due date.
Last reviewed on 11 November 2026 by Vinay Jaglan, VJ & Associates. Law and portal screens change — verify before acting, or ask the office.
