MSME 45-Day Payment Rule
Under the MSMED Act, a buyer purchasing from a registered micro or small enterprise must pay within 45 days (or the agreed term, if shorter) — with mandatory compounded interest for late payment.
The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 sets a maximum payment period of 45 days for buyers purchasing goods or services from a registered micro or small enterprise, even if a longer period was agreed in a contract.
If payment is delayed beyond this period, the buyer is liable to pay compound interest (monthly rests) at three times the RBI-notified bank rate — a significantly higher rate than most standard late-payment clauses, and one that applies automatically under the law regardless of what your invoice or contract says.
For freelancers and small agencies registered under Udyam (MSME registration), this is one of the strongest legal tools available against chronically late-paying clients — but it only applies if you’re registered as an MSME and your buyer is aware of (or can be shown) that status.
Written by the InvoicePilot Team.