How do I send a demand notice under the MSMED Act 45-day rule?

Client paying late? See the MSMED Act 45-day rule for Udyam-registered freelancers, interest under Section 16, and a demand notice you can send.

The risky clause

Payment will be made within 90 days of invoice approval at the Client's convenience.

Why it is dangerous

For an Udyam-registered micro or small supplier, Section 15 of the MSMED Act 2006 generally requires payment within the agreed period, which cannot exceed 45 days from acceptance. Section 16 provides compound interest at three times the bank rate for delay, and Section 18 lets you approach the facilitation council. Check that you qualify and ask a CA or lawyer before sending a formal notice. This is general information, not legal advice.

Safer clause to propose

Payment is due within 15 days of invoice and in any case not later than 45 days from acceptance of the services. Delayed amounts carry interest as provided under the MSMED Act 2006.

Message to send

Subject: Payment due under MSMED Act 2006

Dear [Client],

Invoice [NO] dated [DATE] for Rs [AMOUNT] is overdue. I am Udyam-registered ([UDYAM NO]). Please pay within 7 days, failing which I will claim interest under Section 16 and approach the facilitation council. Regards, [Your Name]

Frequently asked questions

Does the MSMED Act apply to freelancers?

It can apply if you are registered on Udyam as a micro or small enterprise supplying services. Confirm your registration and facts with a professional.

What interest can I claim for delayed payment?

Section 16 provides compound interest with monthly rests at three times the bank rate notified by RBI, subject to the Act's conditions.

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