MSME-1 Return Filing for Companies
If your company buys from micro or small enterprises and has paid, or still owes, any bill beyond 45 days, it must file Form MSME-1 with the ROC every half-year. The due dates are 30 April and 31 October. We reconcile your vendor dues, check the Section 43B(h) income-tax effect and file MSME-1 on the MCA V3 portal.
What it is
MSME-1 is a half-yearly return in which a company tells the Registrar of Companies how it has paid its micro and small suppliers. It lists the suppliers, their PAN, the amounts paid late or still pending beyond 45 days, and the reason for each delay.
The return comes from the Specified Companies (Furnishing of information about payment to micro and small enterprise suppliers) Order, 2019, issued on 22 January 2019 under Section 405 of the Companies Act, 2013. An order of 15 July 2024 substituted it and widened what the form asks. The 45-day limit itself comes from Section 15 of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act).
Who it applies to
Companies that buy from micro or small units
Any company, private or public, that receives goods or services from suppliers registered as micro or small enterprises. Medium enterprises do not count for MSME-1.
Where a payment crossed 45 days
The trigger is a payment made, or still due, more than 45 days after the supplier’s goods or services were accepted or deemed accepted. Since the July 2024 change, a delayed payment during the half-year counts even if nothing is outstanding on the last day.
Not LLPs or firms
MSME-1 is a Companies Act filing, so LLPs, partnerships and proprietors do not file it. The 45-day rule and the income-tax disallowance still apply to them.
Why it matters
Avoid a Section 405 penalty
A missed MSME-1 can cost the company ₹20,000 plus ₹1,000 a day, up to ₹3 lakh. Officers in default can be penalised too.
Protect your tax deduction
Bills unpaid beyond the MSMED Act limit at 31 March are not deductible that year under Section 43B(h). The same vendor data drives both MSME-1 and your tax computation.
Keep supplier interest in check
Under Section 16 of the MSMED Act, late payments carry compound interest at three times the RBI bank rate, with monthly rests. Tracking dues for MSME-1 shows you where interest is building up.
The Section 43B(h) income-tax link
Section 43B(h) of the Income-tax Act, 1961 was inserted by the Finance Act, 2023 and applies from assessment year 2024-25. It says a payment due to a micro or small enterprise is deductible only in the year it is actually paid, unless you pay within the time allowed by Section 15 of the MSMED Act.
| Situation | Time limit under Section 15 | Tax effect if unpaid at year-end beyond the limit |
|---|---|---|
| No written agreement on credit period | 15 days from acceptance | Deduction moves to the year of payment |
| Written agreement | Agreed date, but not more than 45 days | Deduction moves to the year of payment |
| Supplier is a medium enterprise | Not covered | No 43B(h) disallowance |
| Supplier only trades | Generally not covered | No 43B(h) disallowance in most cases |
Take a Faridabad auto-component company that buys castings from a small foundry on 60-day credit. Here is the catch: even with a written agreement, the law caps credit at 45 days. A bill accepted on 1 February 2026 was due by 18 March. If it is still unpaid on 31 March, it is added back for FY 2025-26, and it goes into the MSME-1 due on 30 April. A bill accepted on 1 March is not yet overdue on 31 March, so it stays deductible.
Interest paid to a supplier under Section 16 of the MSMED Act is not deductible at all. For returns from tax year 2026-27, the same rule continues under the Income-tax Act, 2025.
The MSME-1 workings and the 43B(h) check use the same ledger, so we do them together. If your accounts are audited, our tax audit team picks up the same schedule.
Documents required
From your books
- Purchase and expense ledger for the half-year
- Creditor ageing with invoice and acceptance dates
- Payment entries with dates
About your suppliers
- Udyam registration certificate or number of each micro or small supplier
- Supplier PAN
- Agreed credit period, if in writing
From the company
- Reason for each delayed payment
- Valid DSC of a director or company secretary
- Company login on the MCA V3 portal
How it works
Identify your micro and small suppliers
We collect Udyam registration details from your vendors and tag each one as micro, small or medium in your accounting software. Since 1 April 2025, a micro enterprise has investment up to ₹2.5 crore and turnover up to ₹10 crore; small goes up to ₹25 crore and ₹100 crore.
Age every bill from the acceptance date
We work out the due date for each invoice, 15 days or the agreed period up to 45 days, and separate payments made on time, payments made late and dues still pending.
Record the reason for each delay
The form asks why each payment was late. Keep it short and factual: a quality dispute, a pending credit note, an invoice received weeks after the goods.
File MSME-1 on the MCA V3 portal
We prepare the form, get it signed with a director’s DSC and file it by 30 April or 31 October. You get the filed form and SRN for your records.
Use the same data at year-end
At 31 March, the same schedule tells you which bills face a 43B(h) disallowance. Paying them before year-end keeps the deduction in the same year.
Timelines
31 October for April–September
The return for the half-year from 1 April to 30 September is due by 31 October. For this year, that is 31 October 2026.
30 April for October–March
The return for 1 October to 31 March is due by 30 April. The next one falls on 30 April 2027.
Pay suppliers within 15 or 45 days
15 days from acceptance without a written agreement. Up to 45 days with one. Both MSME-1 and Section 43B(h) run on these limits.
What happens if you miss it
The ROC levies a Section 405(4) penalty
₹20,000, and ₹1,000 for each day after the first that the failure continues, up to ₹3 lakh. Knowingly filing incorrect information attracts the same penalty.
You owe your supplier interest
The MSMED Act makes you liable for compound interest at three times the bank rate notified by the RBI, with monthly rests, from the date payment was due.
Your taxable income goes up
Unpaid overdue bills at 31 March are added back under Section 43B(h). The deduction comes back only in the year you pay.
Frequently asked questions
What are the due dates for filing MSME-1?
MSME-1 is due twice a year: by 31 October for the half-year April to September, and by 30 April for October to March. The next due date is 31 October 2026. The return covers payments to micro and small suppliers that crossed 45 days in that half-year. If you start the vendor reconciliation in the first week of October, the filing is comfortably on time.
Does every company have to file MSME-1?
No, only companies with a payment to a micro or small supplier that was made late, or is still pending, beyond 45 days from acceptance. A company that buys nothing from micro or small enterprises, or always pays them within the limit, has nothing to report. Medium enterprises are outside the form. We check your vendor list first, so you file only when the law asks you to.
Do we need to file MSME-1 if nothing is outstanding on 30 September?
Yes, if any payment during the half-year was made after 45 days. The order substituted on 15 July 2024 asks for payments made within 45 days, payments made late, and dues pending under and over 45 days. So a late payment cleared before the half-year end still makes you a reporting company. Once your vendor ageing is set up, this check takes minutes each half-year.
What is the penalty for not filing MSME-1?
Under Section 405(4) of the Companies Act, 2013, the company faces a penalty of ₹20,000, plus ₹1,000 for each day the failure continues after the first, up to a maximum of ₹3 lakh. Officers in default can also be penalised. Filing a correct return before the ROC acts is the simplest way to avoid it.
How is MSME-1 linked to Section 43B(h) of the Income-tax Act?
Both rest on the same Section 15 time limit of the MSMED Act: 15 days without an agreement and up to 45 days with one. Under Section 43B(h), a bill to a micro or small supplier still unpaid beyond that limit at 31 March is deductible only in the year you actually pay it. MSME-1 reports the same delays to the ROC. Clear overdue bills before 31 March and the deduction stays in the right year.
Are payments to traders and medium enterprises covered?
Medium enterprises are not covered by MSME-1 or by Section 43B(h). Pure traders registered on Udyam are generally outside Section 15 of the MSMED Act, so 43B(h) does not usually apply to them either. What matters is the supplier’s Udyam category and activity, so we keep that on record for each vendor. Tag each vendor once and later filings are quick.
How do we know if a supplier is a micro or small enterprise?
Ask for the supplier’s Udyam registration certificate, which states the category. Since 1 April 2025, micro means investment up to ₹2.5 crore and turnover up to ₹10 crore; small means up to ₹25 crore and ₹100 crore. A supplier can move category over time, so we suggest collecting a fresh declaration each year.
What interest does a late payment to an MSE supplier attract?
Compound interest at three times the bank rate notified by the RBI, with monthly rests, from the date the payment fell due, under Section 16 of the MSMED Act. It is also not deductible for income tax. Paying within the agreed credit period avoids both the interest and the reporting.
Can we file a missed MSME-1 return now?
Yes. A missed half-year can still be filed on the MCA V3 portal, and filing before any notice limits your exposure to the Section 405(4) penalty. We rebuild the data for the missed period from your ledgers and bank statements, then file the pending returns in order. Most companies can catch up within a few working days.
What it costs
Our fee plus the government fee that applies to your case, quoted before you commit. Tell us the situation and we will price it exactly.
Ready to begin?
Send us your creditor ledger for April to September and we will tell you whether you need to file MSME-1 by 31 October, and file it if you do.