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MSME Delayed Payment Interest Calculator

Calculates compound interest due to Micro, Small & Medium Enterprises (MSMEs) in India for delayed payments as per the MSMED Act, 2006.

Your details

The principal amount of the invoice that was paid late.

The date the goods/services were accepted by the buyer, or the invoice date if no specific acceptance date.

The number of days from acceptance by which payment was due. Maximum 45 days for MSMEs under the MSMED Act.

The date payment was finally made. If unpaid, enter the date up to which you want to calculate interest.

The annual Bank Rate set by the Reserve Bank of India (RBI). The MSMED Act prescribes a rate of three times this rate. Enter the latest known rate. As of October 20, 2026, the RBI Bank Rate is 6.50%.

Result

Total Interest Payable ₹373.97

The total interest the buyer owes the MSME supplier for the delayed payment.

How it is calculated

Payment Due Date The date by which payment should have been made.
14 February 2026
Interest Start Date Interest begins to accrue from the day after the due date.
15 February 2026
Total Delay Period Total number of days for which interest is payable.
14 days
Applicable Annual Interest Rate Three times the RBI Bank Rate, as mandated by the MSMED Act.
19.5 %
Monthly Compounding Rate Annual rate divided by 12 for monthly compounding.
1.62 %
Number of Full Months Delayed Complete calendar months in the delay period.
0 months
Compound Interest for Full Months Interest compounded monthly on the principal for each complete month of delay.
₹0.00
Simple Interest for Remaining Days Simple interest on the new total (principal + compound interest) for any leftover days not forming a full month.
₹373.97
Total Amount Payable (Principal + Interest) The final amount the buyer must pay, including the original invoice and all accrued interest.
₹50,373.97
Keep in mind
  • This calculator assumes monthly compounding of interest as per common interpretation of the MSMED Act. Some legal opinions may differ on the compounding frequency.
  • The RBI Bank Rate changes periodically. For the most accurate calculation, use the rate applicable on the date the payment became due. The default value is an example; verify the current rate on the RBI website.
  • The maximum agreed payment period for MSME suppliers is legally capped at 45 days from the date of acceptance of goods/services.
  • This tool provides an estimate. For formal legal action or recovery, consult a legal professional.

Indicative result, calculated from the details and the rules listed below. It does not replace an official calculation or advice from a professional.

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Notice to Inform about the Delay in Payment for the Delivery of Goods
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Interest on Delayed Payments to MSMEs in India

The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, provides strong protection for MSMEs against delayed payments from buyers. Under Section 16 of the Act, if a buyer fails to make payment to an MSME supplier within the agreed period (not exceeding 45 days), the buyer is liable to pay compound interest on the outstanding amount.

How is the Interest Calculated?

The interest rate is three times the Bank Rate notified by the Reserve Bank of India (RBI). This rate is compounded on a monthly basis. The calculation period starts from the day immediately following the agreed payment due date and runs until the date of actual payment.

The calculation involves two parts:

  1. Compound Interest for Complete Months: For every full calendar month of delay, interest is calculated on the outstanding principal (and any previously accrued interest) using the monthly equivalent of the annual rate.
  2. Simple Interest for Remaining Days: For any leftover days that do not complete a full month, simple interest is calculated on the new total (principal + compound interest) for that exact number of days.

Example Calculation

An MSME supplies goods worth ₹1,00,000, accepted on January 1, 2026. The payment terms are 30 days, making the due date January 31, 2026. The buyer pays on April 15, 2026. The RBI Bank Rate is 6.5% per annum.

  • Applicable Rate: 3 x 6.5% = 19.5% per annum.
  • Delay Period: From February 1 to April 15 = 2 full months (Feb, Mar) + 15 days.
  • Compound Interest for 2 months: Interest on ₹1,00,000 at 1.625% per month (19.5%/12) for 2 months = ₹1,00,000 * ((1.01625^2) - 1) = ₹3,275.39
  • New Principal for Remaining Days: ₹1,00,000 + ₹3,275.39 = ₹1,03,275.39
  • Simple Interest for 15 days: ₹1,03,275.39 * 19.5% * (15/365) = ₹827.41
  • Total Interest: ₹3,275.39 + ₹827.41 = ₹4,102.80
  • Total Payable: ₹1,00,000 + ₹4,102.80 = ₹1,04,102.80

Common Scenarios

Goods vs. Services: The Act covers both. The date of "acceptance" is key. For services, it is often the date the invoice is raised or the service is completed and acknowledged.

Unpaid Invoices: You can use the calculator with a future "Calculation Date" to estimate interest up to the present day or a proposed settlement date.

Multiple Invoices: Interest must be calculated separately for each invoice, as each will have its own acceptance and due date.

Next Steps: Formal Demand for Payment

If a payment is significantly delayed, the first formal step is usually to send a notice to the buyer. This serves as a legal record of your claim and can often prompt payment without needing to go to court. A well-drafted notice should include details of the transaction, the calculated interest, and a clear deadline for payment.

You can use our Notice to Inform about the Delay in Payment for the Delivery of Goods to create this formal communication. It allows you to detail the invoice, the overdue period, and the interest claimed, making your demand clear and legally sound.

Frequently asked questions

From which date is MSME delayed payment interest calculated?

Interest starts accruing from the day immediately following the agreed payment due date. The due date is calculated as the date of acceptance of goods/services plus the agreed payment period (max 45 days).

What is the interest rate for late payment to MSME?

The interest rate is three times the Bank Rate notified by the Reserve Bank of India (RBI). This rate changes periodically. For example, if the RBI Bank Rate is 6.5%, the applicable late payment rate is 19.5% per annum.

Is the interest compounded monthly?

Yes, as per the MSMED Act and its common interpretation, the interest is compounded monthly. This means interest for each month is added to the principal for calculating interest in the next month.

Who is considered an MSME under this Act?

An MSME is defined based on investment in plant & machinery (for manufacturing) or equipment (for services) and annual turnover. The specific limits are revised periodically by the government. You should check your enterprise's registration status on the Udyam portal.

What if the buyer is also an MSME?

The provisions of the MSMED Act apply to the transaction. If the buyer (who is also an MSME) fails to pay another MSME supplier on time, they are still liable to pay the compound interest as per the Act.

Can I claim this interest if there is no written agreement on payment terms?

Yes. The MSMED Act mandates that the payment period shall not exceed 45 days from the date of acceptance. If no period is agreed upon, the maximum 45-day period applies by law, and interest starts after that.

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