Govt may relax 45-day payment rule for MSMEs in Union Budget 2024

The government may relax the requirement of making payments to MSMEs within 45 days of buying goods and services to check large corporate from looking at other sourcing avenues, sources said.

The announcement to this effect could be made in the Budget likely to be presented on July 23.

The government is considering suggestions regarding changes to Section 43B(h) of the Income Tax Act made by MSMEs during pre-Budget consultations, sources said.

The government in last year's Budget added a new clause under Section 43B of the Income Tax Act to address the challenge of delayed payments faced by MSMEs in the country.

According to Section 43B(h) of the Income Tax Act, introduced through the Finance Act 2023, if a larger company does not pay an MSME on time -- within 45 days in case of written agreements -- it cannot deduct that expense from its taxable income, leading to potentially higher taxes.

MSMEs fear that due to this provision, large buyers could cold-shoulder MSME suppliers and