MSME · Free calculator
Calculate MSME interest under section 16 of the MSMED Act 2006: compound interest with monthly rests at 3× the RBI bank rate on any late payment to a registered micro or small enterprise.
Quick Statutory Answer
Under Section 16 of the MSMED Act 2006, delayed payment to a registered micro or small enterprise attracts mandatory compound interest with monthly rests at 3× the RBI bank rate (16.50% p.a. based on the 5.50% bank rate as of 2026). The penalty accrues automatically from the day after the agreed credit period (maximum 45 days under Section 15) and cannot be waived by contract.
| Overdue Duration | Monthly Rest Factor | Compound Interest Accrued | Total Amount Due | Section 43B(h) Deduction Status |
|---|---|---|---|---|
| 30 Days (1 Month) | 1.375% per mo | ₹1,375 | ₹1,01,375 | Allowed if paid in FY |
| 60 Days (2 Months) | Compounded monthly | ₹2,769 | ₹1,02,769 | Allowed if paid in FY |
| 90 Days (3 Months) | Compounded monthly | ₹4,182 | ₹1,04,182 | Allowed if paid in FY |
| 180 Days (6 Months) | Compounded monthly | ₹8,534 | ₹1,08,534 | Disallowed if overdue at 31 March |
| 365 Days (1 Year) | Compounded monthly | ₹17,807 | ₹1,17,807 | 100% Disallowed under Section 43B(h) |
On ₹1,00,000 that fell due on 1 January 2026, unpaid as at 1 July 2026, with a bank rate of 5.5% (RBI, as on 4 September 2026): the statutory rate is 16.5% a year compounded monthly, 181 days have run, and the interest is ₹8,589 — bringing the recoverable total to ₹1,08,589. Simple interest on the same facts would understate it, which is why s.16 says monthly rests.
Three times the bank rate notified by the Reserve Bank of India, compounded with monthly rests, under section 16 of the MSMED Act, 2006. It runs from the appointed day, which is the day after the agreed payment date or, where there is no written agreement, after fifteen days from acceptance — and in no case later than forty-five days.
Compound, with monthly rests. Section 16 says so expressly. This is the single most common error in online calculations of this figure, and it materially understates what is owed on an amount that has been outstanding for many months.
No. Section 16 applies notwithstanding anything contained in any agreement between the buyer and the supplier, so a clause fixing a lower rate, or waiving interest altogether, does not displace the statutory rate.
The bank rate notified by the Reserve Bank of India, which is distinct from the repo rate and is published by the RBI. Because it moves, this calculator takes it as an input rather than assuming a figure that would silently go out of date.
Apply compound interest with monthly rests at three times the RBI bank rate from the appointed day. The formula is: principal × (1 + monthly rate)^whole months × (1 + monthly rate × odd days/30), where monthly rate = (3 × bank rate%) / 1200. This calculator does it automatically from the due date and as-on date you enter.
Three times the current RBI bank rate. At 5.5%, the MSME section 16 interest rate is 16.5% per annum compounded monthly. The bank rate changes with RBI policy decisions — enter it as an input above to get the accurate figure for the current period.
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