For tax audits of companies and firms for FY 2024-25 (Assessment Year 2025-26), Clause 22 of Form 3CD governs MSME payment disclosures. It ensures that amounts due to micro and small enterprises are transparently reported, in line with the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act).
Legal Framework
Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act):
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Section 15 – Appointed Day for Payment Timelines
Defines the statutory date by which buyers must make payments to MSME suppliers.-
Purpose: Ensures timely settlement of dues.
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Non-compliance triggers liability under Section 23.
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Section 23 – Interest on Delayed Payments
Grants suppliers the right to claim simple, non-compounded interest if payments are not made by the appointed day.-
Ensures prompt payment to protect MSME suppliers.
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Interest accrual is calculated from the appointed day until actual payment.
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Form 3CD Instructions:
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Clause 22 requires reporting of all principal and interest amounts due to MSMEs, based on the above statutory provisions.
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Provides clarity on MSME categories and the “appointed day” for reporting purposes.
Mandatory Reporting Items under Clause 22
Auditors are required to disclose the following numeric details:
| Particulars | Description |
|---|---|
| Principal Amount Remaining Unpaid | Total sum payable to MSME suppliers as at the balance-sheet date. |
| Interest Due and Payable | Interest accrued on unpaid principal under MSMED Act (simple, non-compounded). |
| Interest Paid Beyond Appointed Day | Actual interest paid during the year for delays beyond the statutory timeline. |
| Interest Accrued and Unpaid | Difference between interest due and interest paid at year-end. |
| Further Interest Remaining Due | Interest still payable after the year-end under MSMED provisions. |
Analytical Insight:
Clause 22 ensures full visibility of MSME obligations, allowing auditors and management to monitor timely payments, quantify interest liabilities, and maintain compliance with statutory requirements under the MSMED Act.
Presentation Best Practices
Tabular Format Example:
| Particulars | Amount (₹) |
|---|---|
| Principal unpaid as at 31-03-2025 | [A] |
| Interest due and payable under MSMED Act | [B] |
| Interest paid beyond appointed day during 2024-25 | [C] |
| Interest accrued and unpaid as at 31-03-2025 | [D] = (B – C) |
| Further interest remaining due and payable after year-end | [E] |
Supplier-Wise Disclosure (if material):
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Breaking down amounts by supplier demonstrates compliance transparency, especially when dealing with multiple significant MSME suppliers.
Key Points
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Clause 22 ensures statutory compliance with the MSMED Act.
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Accurate disclosure of principal and interest amounts safeguards supplier rights and strengthens audit transparency.
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Proper reporting enhances management oversight, enabling timely payment resolution and clear documentation of MSME obligations.
