A credit period is the agreed time for payment after delivery or invoice, such as 30, 45 or 60 days. Where the supplier is a micro or small enterprise, Section 15 of the MSMED Act caps it at 45 days from the day of acceptance; if nothing is agreed, payment is due within 15 days. Section 43B(h) of the Income-tax Act disallows the buyer's deduction for such dues until they are actually paid.
How it works in India
The credit period is usually written on the purchase order or the tax invoice, for example "payment within 30 days of invoice". Large buyers often impose 60 to 120 days. That is lawful between medium or large businesses, but where the supplier is Udyam-registered as micro or small, any period beyond 45 days from acceptance is ineffective for the delayed-payment provisions, and interest runs from the statutory due date. See the 45-day payment rule.
Why it matters for getting paid
A clearly written credit period turns "we will pay soon" into a fixed due date. That date starts interest, sets the limitation period, and gives your reminders and notices a concrete reference. It is also the benchmark for your DSO. Without a written term, buyers argue for longer credit based on "industry practice".
How FundRaksha uses it
FundRaksha's advocates compute the due date for each invoice, applying the 45-day cap where the supplier is micro or small, and quote the resulting interest and the buyer's Section 43B(h) exposure in the notice. FundRaksha Collect sends reminders before and on the due date, for a 1% fee on collections. A free consultation checks your terms.
Worked example (hypothetical)
A Udyam-registered micro enterprise in Nashik supplies machined parts to a large automobile company. The purchase order says 90 days. The goods are accepted on 1 April. Under Section 15, the agreed period cannot exceed 45 days from acceptance, so payment falls due on 16 May, and Section 16 interest runs from that date if the buyer pays later. If the buyer is still unpaid at its financial year end, it cannot deduct this purchase cost for that year under Section 43B(h). The supplier's reminder on 10 May points out both consequences, and the buyer releases payment on 14 May.
Last reviewed: 2026-10-08. Information for Indian businesses; not legal advice.