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MSME Late Payment Interest Rate: Rules & Calculation

If you are looking for an nda review checklist or wondering what is included in an nda review checklist, this comprehensive guide covers the essential clauses to review before signing a Non-Disclosure Agreement in India.

By Contract Shield, Head of Legal

Published: January 24, 2026 • Last Updated: May 2026 • 6 min read

What is an Nda?

Reviewing an NDA involves verifying the definition of confidential information, carve-outs, return of data clauses, duration of obligation, and the choice of governing law.

Here's a 10-point checklist to review before signing any NDA.

☑️ 1. Is it Mutual or One-Way?

A mutual NDA protects both parties. A one-way NDA only protects them. If you're sharing information too, insist on mutual protection.

☑️ 2. What's the Definition of "Confidential Information"?

Too broad? It might include publicly available info. Too narrow? Your secrets might not be covered. Look for clear, reasonable definitions.

☑️ 3. What Are the Exclusions?

Standard exclusions include: publicly known info, independently developed work, and info received from other sources. Make sure these are present.

☑️ 4. How Long Does It Last?

Typical duration: 2-5 years. Perpetual NDAs should be avoided unless truly necessary. You don't want obligations lasting forever.

☑️ 5. What Happens When It Ends?

Must you return documents? Delete files? Some NDAs require you to certify destruction in writing. Know your exit obligations.

☑️ 6. Are There Non-Compete or Non-Solicitation Clauses?

⚠️ Red flag! Some NDAs sneak in clauses preventing you from working with competitors or hiring their employees. This might not be what you signed up for.

☑️ 7. What's the Jurisdiction and Dispute Resolution?

If disputes happen, where will they be resolved? Avoid NDAs with jurisdiction in foreign countries where you have no presence.

☑️ 8. Are There Residuals Clauses?

Residuals clauses let the other party use "unaided memories" of your information. This can effectively gut your protection.

☑️ 9. Who Can Information Be Shared With?

Can they share with employees? Contractors? "Affiliates" (which could include hundreds of companies)? Limit sharing to those with a "need to know."

☑️ 10. What Are the Remedies for Breach?

Look for acknowledgment that breach may cause irreparable harm and that injunctive relief is available. This gives you legal leverage if they violate the NDA.

Don't Sign Blindly. Protect Yourself.

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Common NDA Pitfalls to Watch Out For

High Risk

Unreasonable Duration

Avoid "perpetual" NDAs unless it involves trade secrets. Standard commercial confidential information should have a time limit (e.g., 2-5 years).

Medium Risk

Broad Definition of Confidential Information

Ensure the definition isn't so broad that it covers public information or knowledge you already had. It should be specific to the engagement.

Signature & Execution Best Practices

Before signing, ensure:

• Correct Parties: Verify legal entity names are exact (e.g., "Pvt. Ltd." or "Inc.").
• Signatory Authority: Ensure the person signing has the legal authority to bind the company.
• Jurisdiction Check: If you are in India, ensure the governing law is an Indian state/city convenient for you (e.g., "Courts of Bangalore").

Quick Reference: NDA Red Flags

• ❌ Perpetual or excessively long duration (10+ years)
• ❌ Hidden non-compete or non-solicitation clauses
• ❌ One-way protection when you're sharing info too
• ❌ Jurisdiction in a foreign country
• ❌ Overly broad definition of confidential information
• ❌ Residuals clauses that gut your protection

Final Tip

Never sign an NDA under pressure. If someone says "sign now or miss the opportunity," that's a red flag about the partnership itself. Legitimate businesses give you time to review.

MSME Delayed Payment Rules: The Complete 2026 Guide

India's MSME sector — comprising over 63 million enterprises — is chronically affected by delayed payments from larger buyers. The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 provides a powerful legal framework to address this. Despite being 18 years old, most MSME suppliers and many buyers remain unaware of the exact provisions and penalties.

Who Counts as an MSME? (2026 Classification)

To claim protection under the MSMED Act, the enterprise must be registered on the Udyam Registration Portal. Udyam registration is free, takes under 10 minutes, and requires only the Aadhaar number of the owner. Without Udyam registration, the protections under the Act are not available.

The Payment Timeline Rules Under MSMED Act

• With written agreement: Payment must be made within the agreed period — but the agreement cannot specify a period exceeding 45 days from the date of delivery of goods or services (Section 15, MSMED Act). Any agreed period beyond 45 days is void.
• Without written agreement: Payment must be made within 15 days of delivery (Section 15).
• Both cases — interest trigger: If payment is delayed beyond the agreed period (max 45 days) or 15 days (if no agreement), compound interest accrues automatically at 3× the RBI bank rate.

How to Calculate MSME Delayed Payment Interest

The interest rate is: 3 × RBI Bank Rate. As of June 2026, the RBI Bank Rate is 6.5%, making the effective MSME interest rate approximately 19.5% per annum, compounded monthly.

Example: Invoice of ₹5,00,000 | Due Date: 1 March 2026 | Payment Date: 1 June 2026
Delay: 92 days (~3 months)
Interest = ₹5,00,000 × 19.5% × (92/365) = ₹24,616

MSME Samadhaan: How to File a Delayed Payment Complaint

The Ministry of MSME operates the MSME Samadhaan portal (samadhaan.msme.gov.in) for filing delayed payment complaints. The process is:

1. Register on the Samadhaan portal using your Udyam Registration number
2. File an application with invoice copies, delivery proof, and correspondence
3. The case is referred to the MSME Facilitation Council of the relevant state
4. Conciliation is attempted first (45-day window)
5. If conciliation fails, the Council acts as an arbitrator and issues an award
6. The award is enforceable as a decree of a civil court

Section 43B(h) of the Income Tax Act: The Buyer's Incentive to Pay

A significant 2023 amendment to the Income Tax Act added Section 43B(h), which provides that any payment due to an MSME supplier that remains unpaid beyond the period specified in the MSMED Act is not deductible as a business expense in the buyer's accounts for that financial year. Payment is only deductible when actually made — not when accrued. This creates a powerful incentive for corporate buyers to pay MSME vendors on time, as delayed payment results in a higher taxable profit for the buyer company.