MSME Delayed Payment Interest Calculator
Calculate interest on delayed customer payments compounded monthly at 3x the RBI repo rate under Section 16 of the MSMED Act.
Quick Answer: How Is MSME Delayed Payment Interest Calculated?
Under Section 16 of the MSMED Act, buyers who delay payment to registered Micro & Small enterprises beyond 45 days (with agreement) or 15 days (without agreement) must pay compound interest with monthly rests at 3 times the RBI repo rate.
- Mandatory interest rate = 3 × RBI Repo Rate (compounded monthly).
- Payment timeframe cap: Maximum 45 days per Section 43B(h) Income Tax rules.
- Interest paid under MSMED Act is strictly non-deductible under Income Tax Act.
- Track overdue purchase bills in Tally Prime automatically with TrulyInvoice AI.
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Statutory Interest: 3x Repo Rate (19.5%)
Invoice Principal
₹1,00,000
MSME Interest Due
₹798
Total Amount Due
₹1,00,798
Liability Breakdown
⚖️ Section 16 of the MSMED Act, 2006:
Where any buyer fails to make payment to the supplier as required under Section 15, the buyer shall, notwithstanding anything contained in any agreement between the buyer and the supplier, be liable to pay compound interest with monthly rests to the supplier on that amount from the appointed day, at three times of the bank rate notified by the Reserve Bank.
Understanding Section 16 of the MSMED Act, 2006
To protect Micro and Small enterprises from working capital crunches due to delayed payments, the Indian Government enacted the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006.
Under Section 15 of the Act, buyers must clear payments within the agreed timeframe, which cannot exceed 45 days from the date of acceptance of goods or services.
⚖️ Penal Interest under Section 16:
If the buyer fails to pay within 45 days, they are legally liable to pay compound interest with monthly rests to the supplier. The interest rate is fixed at three times (3x) the Bank Rate notified by the RBI. Note that this interest is penal and cannot be claimed as a tax deduction by the buyer.
Compounding Monthly Formula
MSME interest is compounded at "monthly rests" (compounded monthly). The compound interest is calculated using the formula:
Interest Due = A - P
Where P is the invoice amount, Repo Rate is the RBI repo rate (e.g. 6.5%), and n is the delay period expressed in months.
How to Post Interest Debit Notes in Tally?
Once you compute the delayed interest, you must issue a Debit Note to the customer to record the interest receivable:
- Enable Interest Calculation in Tally Prime via F11 Statutory/Features > Enable Interest Calculation.
- Configure the Ledger: Go to Gateway of Tally > Ledger > Alter > Select Customer Ledger. Enable "Activate Interest Calculation" and set parameters (19.5% annual rate, compounded monthly).
- Post a Debit Note: Go to Vouchers > F9 Debit Note. Select the Interest Class to auto-populate the accumulated interest, or enter the calculator's value manually to bill the customer.
Frequently Asked Questions
Everything you need to know about TrulyInvoice for Tally Prime.
On clear digital PDF invoices, TrulyInvoice achieves approximately 96% field-level extraction accuracy based on internal benchmarks. Accuracy on handwritten or low-resolution scanned invoices is approximately 88-90%. Our review-first workflow ensures you catch and correct any AI omissions before they reach Tally.
TrulyInvoice differs from Suvit in three specific ways: (1) Bulk upload support — TrulyInvoice processes multi-file batches at once vs Suvit's 10-invoice cap. (2) Transparent monthly plans starting at ₹399/month for 1,000 pages (Lite), ₹599 for 2,000 pages (Plus), and Custom High Volume Plans vs Suvit's annual subscription model. (3) Multi-user team seating (up to 3 seats) sharing a single voucher quota. Suvit includes broader module coverage like GST filing that TrulyInvoice focuses on purely as a dedicated invoice-to-Tally engine.
Yes. TrulyInvoice's AI extracts data from handwritten invoices, PDFs, scanned images, and multi-page documents. It's trained on diverse Indian invoice formats including handwritten text.
Setup is typically quick: sign up, enable Port 9000 in Tally settings, install the connector, and test with a sample invoice.
TrulyInvoice supports common GST scenarios and can help map interstate (IGST) and intrastate (CGST+SGST) flows based on invoice and ledger data.
TrulyInvoice supports PDF invoices, JPG/PNG images, scanned documents, and handwritten invoices. It works with GST invoices, purchase bills, and sale invoices from any Indian vendor.
Yes. TrulyInvoice works with Tally running on your local computer. Enable Port 9000 in Tally settings (F1 > Settings > Connectivity) and the connector handles the rest. No cloud hosting required.
TrulyInvoice automatically creates missing ledgers and stock items in Tally. You can also create them manually in Tally and click Refresh to sync.
Yes. Invoices are encrypted in transit and at rest. The Tally sync happens on your computer — data never leaves your network during the sync process.
TrulyInvoice processes most invoices in 15-30 seconds from upload to Tally sync. This includes AI extraction, your review, and the actual sync. A single user can process 100+ invoices in under an hour with the review-first workflow.
TrulyInvoice includes a mandatory review step before syncing. You can edit any field the AI extracted. Additionally, mathematical validation checks if amount equals quantity multiplied by rate, flagging potential calculation errors automatically before they reach Tally.
No technical expertise required. Setup involves three simple steps: enable Port 9000 in Tally settings (F1 > Settings > Connectivity), download the connector app, and sign in. Most users complete setup in under 5 minutes. Phone and WhatsApp support is available if needed.
Yes. You can upload up to 20 invoices per batch upload (PDFs, scans, or photos). The system processes them sequentially with 99%+ accurate AI extraction, and you can review and sync them individually or in batches to Tally Prime.
TrulyInvoice creates both Purchase and Sales vouchers in Tally. It supports standard GST scenarios including intra-state (CGST+SGST) and inter-state (IGST) transactions. The system auto-maps GST rates and creates appropriate ledgers based on your invoice data.
Yes. TrulyInvoice includes a free 14-day trial with instant signup — no credit card required. Plans start at ₹399/month for Lite (1,000 pages) and ₹599/month for Plus (2,000 pages, 2 seats) after your trial ends. No hidden costs.
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Upload Invoice
Drag & drop PDFs, scans, or photos.
AI Extraction
Line items, tax, and ledgers mapped.
1-Click Review
Verify extracted details on dashboard.
Direct Sync
Vouchers created instantly in Tally Prime.