Amendment in Sec 43B of Income Tax Act

Section 43B: Certain Deductions to be allowed only on Actual Payment

Following clause (h) shall be inserted after clause (g) of section 43B by the Finance Act, 2023

Any sum payable by the assessee to a micro or small enterprises beyond the time limit specified in section 15 of the Micro, Small Enterprises Development Act, 2006 (27 of 2006), shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in the computing the income referred to in section 28 of that previous year in which such sum is actually paid by him. This Amendment in section 43B will be effective from Assessment Year 2024-25.

Time limit specified in section 15 of the Micro, Small and Medium Enterprises Development Act, 2006

Section 15 of MSMED Act, 2006 provides the time limit frame up to when payment shall be made by the buyer to Micro or Small Enterprises supplier, where any supplier, supplies any goods or renders any services to any buyer, the buyer shall make payment on or before the date agreed upon between him and the supplier in writing or, where there is no agreement in this behalf, before the appointed day.

Provided that in no case the period agreed upon between the supplier and the buyer in writing shall exceed Forty Five Days from the day of acceptance or the day of deemed acceptance.

Details Related to agreement between buyer & Seller

• If agreement Stipulated 20 Days than payment is to be made in within 20 Days of invoice.
• If agreement Stipulated 60 Days than payment is to be made in within 45 Days of invoice.
• if no agreement than within 15 days of invoice.

Definition of Micro and Small Enterprises (Section 7):

Conclusion:

If any payment is outstanding to Creditors (Micro or Small Enterprise) as on 31.03.2025, which is due more than 45 days than than that amount payable to creditors ( Micro or Small Enterprises) added to the profit. So income tax payment required to pay on that amount also. This is due to amendment done in section 43B by Finance Act, 2006

Purchase and Expenses incurred on or after 01st February every year is to be checked if relates to micro or small then payment has to be made within time as per MSMED Act 2006 (it is assumed that purchases and expenses incurred before 01st February shall be anyhow paid up to 31st March). Otherwise purchase/expense shall be DISALLOWED and shall be allowed in the year of actual payment.

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