Section 43B (h) of the Income Tax Act introduces a significant change regarding deduction allowances specifically related to payments made to Micro and Small Enterprises (MSEs).
This section underscores the importance of timely payments to MSMEs, fostering a conducive business environment.
It promotes:
· Financial stability
· Transparency
· Compliance while benefiting both MSMEs and larger enterprises.
Time Limit for Payment:
o Business enterprises are required to pay MSMEs within 45 days, as per section 15 of the MSMED Act, 2006, depending on the presence of a written agreement.
o In the absence of a written agreement, payment should be made within 15 days.
If there is a written agreement, payment shall be made as per the agreed-upon timeline, not exceeding 45 days.
Applicability:
o This clause applies when an enterprise is buying goods or taking services from an enterprise registered under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006.
o Notably, the registration of the buyer under the MSMED Act is not mandatory.
o Clause (h) of Section 43B comes into effect from April 1, 2024.