Disallowance of MSME Purchase / Expenses under Section 43B(h)

Introduction: The Finance Bill 2023 has introduced a significant amendment to the Income Tax Act, 1961, affecting Micro and Small Enterprises (MSMEs). Specifically, the amendment introduces Section 43B(h), impacting the deduction of overdue payments to MSMEs. This article delves into the provisions, implications, and steps for compliance with the new regulation. A. INCOME TAX ACT PROVISIONS: DELAYED PAYMENT OF PRINCIPAL In order to promote timely payments to MSMEs, The Finance Bill 2023 has introduced one more measure by amending section 43B of the Income tax act, 1961 to disallow amount of overdue creditors registered as Micro or Small Enterprises under MSME Development Act (MSMED) 2006. The new Clause (h) to Section 43B has been inserted which is applicable from assessment year 2024-25 and onwards is as under. 43B(h):- Any sum payable by the assessee to a micro or small enterprises, beyond the time limit specified in section 15 of the Micro, small and Medium Enterprises Development Act 2006.