What your overdue invoices are worth today
Section 16 interest, invoice by invoice: compound interest with monthly rests at three times the RBI Bank Rate, from the day after each due date. Build a schedule for one invoice or fifty, then download it or print it.
Calculator
Leave Credit days blank if nothing was agreed in writing (15 days apply). Anything above 45 is treated as 45. Leave Paid on blank if the invoice is still unpaid. Entries are saved only in this browser, on this device. This is an aid to preparing a claim, not a certificate of the amount due.
How it is calculated
Where any buyer fails to make payment of the amount to the supplier, as required under section 15, the buyer shall, notwithstanding anything contained in any agreement between the buyer and the supplier or in any law for the time being in force, be liable to pay compound interest with monthly rests to the supplier on that amount from the appointed day or, as the case may be, from the date immediately following the date agreed upon, at three times of the bank rate notified by the Reserve Bank.Section 16, MSMED Act, 2006
- Due date = acceptance date + agreed credit days (capped at 45), or + 15 days if nothing was agreed in writing.
- Interest starts the next day and runs to the payment date, or to your calculation date if unpaid.
- Rate = 3 × Bank Rate. Today: 3 × 5.75% = 17.25% a year.
- Monthly rests: each whole calendar month adds rate ÷ 12 to the running balance, interest on interest included. Leftover days earn simple interest at rate × days ÷ 365 on the compounded balance.
In formula terms: interest = P × (1 + r/12)m × (1 + r × d/365) − P, where m is whole months of delay and d the remaining days.
How fast it grows
17.25% compounded monthly is an effective 18.68% a year. On ₹10 lakh, at today's rate:
| Delay after due date | Interest owed | Principal + interest |
|---|---|---|
| 3 months | ₹43,748 | ₹10,43,748 |
| 6 months | ₹89,410 | ₹10,89,410 |
| 12 months | ₹1,86,813 | ₹11,86,813 |
| 24 months | ₹4,08,526 | ₹14,08,526 |
| 36 months | ₹6,71,658 | ₹16,71,658 |
A worked example
You supplied goods worth ₹5,00,000, accepted on 1 March 2026. The purchase order gave 30 days credit in writing. Nothing has been paid by 12 October 2026.
- Due date: 1 March + 30 days = 31 March 2026. Interest runs from 1 April.
- Delay to 12 October: 195 days, which is 6 whole months plus 12 days.
- At today's rate (17.25%): interest ≈ ₹47,794.
- At the rate when it fell due (Bank Rate 5.50%, so 16.50%): interest ≈ ₹45,638.
Load the example in the calculator above to see a schedule with several invoices, one of them capped at 45 days and one paid late.
Bank Rate history
RBI's Bank Rate moves with the Marginal Standing Facility rate, currently the repo rate plus 0.25%. Changes since February 2023:
| In force from | Bank Rate | Section 16 rate (3×) |
|---|---|---|
| 7 Oct 2026 | 5.75% | 17.25% |
| 5 Dec 2025 | 5.50% | 16.50% |
| 6 Jun 2025 | 5.75% | 17.25% |
| 9 Apr 2025 | 6.25% | 18.75% |
| 7 Feb 2025 | 6.50% | 19.50% |
| 8 Feb 2023 | 6.75% | 20.25% |
Points Councils decide differently
- Which Bank Rate. Some awards apply the rate on the appointed day, some the rate on the date of the award. The Supreme Court's order in India Glycols records an award at three times the bank rate "prevailing as on the date of the award". State your basis in the claim.
- Part-payments. When the buyer pays part of a bill, how the payment is appropriated, to interest first or to principal, changes the result. The calculator treats each "Paid on" date as full payment of that invoice.
- Interest after the principal is paid. Whether unpaid interest keeps compounding after the principal is cleared is argued both ways. The calculator stops at the payment date.
- Day counts. A day either way at the start or end makes little difference, but be consistent across invoices.
Why buyers settle once they see this number
For the buyer, a late payment costs more than the interest:
- No deduction for the interest, ever. Section 23 of the MSMED Act disallows Section 16 interest as an expense for income tax.
- The purchase cost itself can be disallowed. Under Section 43B(h) of the Income-tax Act, 1961 (from financial year 2023-24) and Section 37(2)(g) of the Income-tax Act, 2025 (from 1 April 2026), a sum owed to a micro or small enterprise beyond the Section 15 time limit is deductible only in the year it is actually paid.
- It shows up in public filings. Audited accounts must disclose MSE dues and interest (Section 22), and companies file a half-yearly MSME Form I with the Registrar.
That exposure belongs in the demand letter and in the conciliation brief. More on the buyer's side.