Module: General Practice
Q46: Regarding the MSME Development Act, 2006 provisions on Delayed Payments, consider the following statements:
The buyer is liable to pay compound interest with monthly rests if payment is not made within 45 days of acceptance.
The interest rate payable is three times the bank rate notified by the RBI.
This interest paid by the buyer is allowed as a deductible expense under the Income Tax Act.
Which of the statements given above are correct?
The interest rate payable is three times the bank rate notified by the RBI.
This interest paid by the buyer is allowed as a deductible expense under the Income Tax Act.
Which of the statements given above are correct?
✅ Correct Answer: A
Statements 1 and 2 are correct; Statement 3 is incorrect.
Section 16 of the MSMED Act, 2006 mandates that if a buyer fails to pay within 45 days (or the agreed period, whichever is lower), they must pay compound interest with monthly rests.
The penal rate is three times the Bank Rate notified by the RBI.
Section 23 of the Act explicitly states that this penal interest is NOT deductible from Income Tax.
This ensures the penalty financially impacts the buyer's bottom line, serving as a strong deterrent against delaying payments to small suppliers.
Section 16 of the MSMED Act, 2006 mandates that if a buyer fails to pay within 45 days (or the agreed period, whichever is lower), they must pay compound interest with monthly rests.
The penal rate is three times the Bank Rate notified by the RBI.
Section 23 of the Act explicitly states that this penal interest is NOT deductible from Income Tax.
This ensures the penalty financially impacts the buyer's bottom line, serving as a strong deterrent against delaying payments to small suppliers.