Small Cos limit hiked to Rs 100 cr turnover, big boost to MSMEs’ ease of doing business

New Delhi: The Ministry of Corporate Affairs (MCA) has raised the financial thresholds for classifying “small companies” under the Companies Act, 2013, nearly doubling the existing limits.

Through a notification issued on December 1, 2025, and effective immediately, the paid-up share capital limit has been increased from Rs 4 crore to Rs 10 crore. The turnover ceiling has been raised from Rs 40 crore to Rs 100 crore for the preceding financial year.

Under the revised Companies (Specification of Definition Details) Rules, 2014, a private company will be treated as a small company if its paid-up capital does not exceed Rs 10 crore and its turnover does not exceed Rs 100 crore. 

Holding and subsidiary companies, Section 8 companies and companies governed by special Acts will continue to remain outside this category.

The move is expected to bring thousands of additional enterprises under the small company framework and give them access to a lighter compliance regime.

Small companies enjoy several relaxations under the Companies Act. These include exemption from mandatory secretarial audit, shorter annual returns and board reports, and no requirement to prepare cash flow statements. 

They also face lower penalties for certain defaults and have simpler norms on related-party transactions and governance.

Industry practitioners say the wider definition will cut compliance costs and free up resources for growth.

Capital markets professional Aditya Garg said that the change could be a “game-changer” for MSMEs by sharply reducing their compliance burden.

Industry bodies such as CII and FICCI have been seeking an upward revision of the thresholds to reflect inflation and the larger scale of operations of many small firms.

The change also aligns with recent tweaks in MSME norms. Earlier this year, the government raised the small enterprise turnover limit to Rs 100 crore under the MSME Development Act. 

The harmonisation of definitions is expected to support easier credit access through schemes such as priority sector lending and the Credit Guarantee Fund Trust for Micro and Small Enterprises.

Policy watchers say the step is in line with the Narendra Modi government’s broader push to improve ease of doing business and support growing enterprises as India chases its multi-trillion-dollar GDP targets.

Companies have been advised to re-evaluate their status in light of the new thresholds and consult professionals to correctly claim the available relaxations.