Section 22 requires a buyer that is required to get its annual accounts audited under any law to disclose in those accounts: the principal and interest due to micro and small suppliers at the year end; the interest paid under Section 16 along with late payments made during the year; the interest due and payable for delays; the interest accrued and remaining unpaid; and the further interest remaining due in succeeding years until paid, for the purpose of Section 23 disallowance.
How Section 22 works in India
At year end the buyer's accounts team must identify creditors that are micro or small enterprises (which is why many buyers ask vendors for Udyam certificates) and compute the Section 16 interest on every late payment during the year, whether or not the supplier has demanded it. The resulting figures go into the notes to accounts. Schedule III of the Companies Act adds a trade payables ageing split between MSME and other creditors. The statutory auditor must be satisfied that the disclosure is complete.
Why it matters for getting paid
Section 22 means your unpaid invoice is not just your problem: it is a line in the buyer's audited accounts, read by its bankers, investors and the income-tax department. The interest the buyer must disclose is also non-deductible under Section 23. Finance teams prefer to clear MSME dues before 31 March rather than report accrued interest. Combine this with MSME-1 and Section 43B(h) and a buyer has three separate reasons to pay a small supplier within 45 days.
How FundRaksha uses it
FundRaksha's advocates cite Section 22 and 23 in notices to audited buyers and, where a buyer's published accounts show no MSME interest despite known delays, point this out. It is a professional, non-threatening way to involve the buyer's finance and audit functions, and part of why about 60% of FundRaksha cases settle before filing. The fee remains 30% on recovery only.
Worked example (hypothetical)
A listed company owes a small Bengaluru software vendor ₹15,00,000, due 1 October 2025 under Section 15, still unpaid at 31 March 2026 (six months). Assuming a 6.5% bank rate (19.5% a year, monthly rests), accrued interest is about ₹1,52,300. The company's FY 2025-26 accounts must disclose principal ₹15,00,000 and interest ₹1,52,300 due to MSME suppliers, and the interest is disallowed under Section 23. The ₹15,00,000 is also deferred under Section 43B(h). The vendor's advocate sends a notice on 15 February; the company pays before year end.
Last reviewed: 2026-10-08. Information for Indian businesses; not legal advice.