Udyam Registered? Your Client Has 45 Days to Pay You
Where you are Udyam-registered as a micro or small enterprise, yes. Section 15 of the MSMED Act, 2006 caps the agreed payment period at 45 days from acceptance, and Section 16 attaches compound interest with monthly rests at three times the RBI bank rate to delay.
Indian freelancers chase payments constantly and negotiate from a position they believe is weak. For those registered as a micro or small enterprise, the position is considerably stronger than most realise, and the reason is a statute almost nobody in the freelance world talks about.
Key takeaways
- The Micro, Small and Medium Enterprises Development Act, 2006 addresses delayed payment to registered micro and small suppliers.
- Section 15 sets the payment period, capped at 45 days from acceptance or deemed acceptance.
- Section 16 provides for compound interest on delay at three times the bank rate notified by the Reserve Bank.
- The protection depends on being a registered supplier, which means Udyam registration.
- Section 18 provides a Facilitation Council route for resolving delayed payment claims.
What Sections 15 and 16 do
Section 15 of the MSMED Act provides that where a supplier who is a micro or small enterprise supplies goods or renders services to a buyer, the buyer shall make payment on or before the date agreed in writing, and in any case that period shall not exceed forty-five days from the day of acceptance or the day of deemed acceptance.
Section 16 provides that where a buyer fails to pay as required, the buyer is liable to pay compound interest with monthly rests, at three times the bank rate notified by the Reserve Bank, from the appointed day. The interest is not something the parties negotiate; the section sets it.
The clause that becomes unenforceable
This is the part that matters commercially. A contract stating payment ninety days from invoice, or one hundred and twenty days, is a term the parties agreed. Against a registered micro or small supplier, the statutory maximum of forty-five days operates regardless of what was agreed.
That changes the negotiation. A freelancer asked to accept ninety-day terms is not simply being asked to wait; they are being asked to accept a term that, if they are registered, does not displace the statutory position. Saying so calmly, in writing, at the point the term is proposed, is a very different conversation from chasing an overdue invoice three months later.
Registration is the condition
The protection attaches to a registered micro or small enterprise, and registration in India is through Udyam. A freelancer who has not registered is not within the framework, however small their operation.
Registration is free, done online, and based on self-declaration linked to PAN and Aadhaar. For an individual freelancer it is a short exercise, and it is the step that converts a general sense of unfairness into a statutory position. If you invoice businesses in India and you are not registered, that is the single highest-value administrative hour available to you.
What acceptance means
The forty-five days runs from acceptance or deemed acceptance rather than from the invoice date, which is worth understanding. Where the buyer objects to the goods or services in writing within fifteen days of delivery, the position differs from where they say nothing.
The practical consequence is that a clean delivery record matters. Confirming delivery in writing, and noting the absence of objection, establishes the date from which the clock runs. This is ordinary discipline rather than legal work, and it is what makes the provision usable rather than theoretical.
How to use it without escalating
Most freelancers do not want to start a dispute with a client they hope to keep. The useful thing about this provision is that it rarely needs to get that far. A polite written note, referring to the statutory position and the interest that accrues, moves an invoice up a payment queue in a way that a fourth follow-up email does not.
Where it does not work, Section 18 provides for reference to a Micro and Small Enterprises Facilitation Council, which offers a lower-cost route than ordinary litigation. Whether that is the right step in your situation, and how the process runs in your state, is worth advice, but knowing the route exists changes how the earlier conversation goes.
Have a contract in front of you?
Upload it and get every clause checked against Indian law, with the provision each finding rests on.
Review your freelance & consultant contractCommon questions
Does this apply to freelancers or only to companies?
The framework attaches to registered micro and small enterprises, and an individual providing services can register on Udyam as a micro enterprise. The question is registration status rather than whether you are a company or an individual.
Our contract says 90-day payment terms. Does that override the Act?
Section 15 caps the period at forty-five days from acceptance in any event. A longer contractual term does not displace that for a registered micro or small supplier. What that means for your specific arrangement is worth confirming, but the agreed term is not the end of the analysis.
Will invoking this damage the client relationship?
That is a commercial judgement rather than a legal one. In practice a calm written reference to the statutory position usually prompts payment rather than a dispute, because the buyer finance team recognises the exposure. Escalation to the Facilitation Council is a separate decision and a later one.
Related guides
This article is general information about Indian law as of 2026-07-26, not legal advice, and reading it does not create an advocate–client relationship. Statutes and rules change, particularly under the Labour Codes where State rules are still being notified. Consult a qualified advocate about your own situation.