Small Company Thresholds Hiked By MCA to ₹10 Cr & ₹100 Cr: MCA Notification G.S.R. 880(E) Dec 2025

In a significant move aimed at easing compliance burdens and fostering growth for mid-sized enterprises, the Ministry of Corporate Affairs (MCA) has substantially revised the financial thresholds defining a “small company” under the Companies Act, 2013. Effective 1 December 2025, the MCA has increased the paid-up capital ceiling from ₹4 crore to ₹10 crore and the annual turnover cap from ₹40 crore to ₹100 crore. This amendment, notified through Notification G.S.R. 880(E), marks the highest-ever expansion of the small company criteria since the provision was introduced, allowing a far greater number of private limited companies to qualify for relaxed regulatory requirements.

Also Read-New Rent Agreement Rules 2025: What Need To Know for Landlords & Tenants in India

The revised thresholds are expected to benefit thousands of businesses by reducing mandatory filings, audit obligations, and procedural compliances, while also encouraging formalization and scalability within India’s corporate ecosystem. The change reflects a strategic shift in India’s corporate governance policy—moving from a restrictive, one-size-fits-all model to a more inclusive and growth-oriented regulatory approach.

Legal Background: Evolution of Small Company Thresholds

The concept of a small company was introduced under Section 2(85) of the Companies Act, 2013, to provide regulatory relief to smaller enterprises and encourage formalization of India’s vast MSME sector. Initially, the definition was narrow: a company qualified as “small” only if its paid-up capital did not exceed ₹50 lakh and its annual turnover was below ₹2 crore. These thresholds, set in 2013, quickly became outdated due to inflation, economic growth, and the evolving scale of Indian businesses.

Recognizing this, the Ministry of Corporate Affairs (MCA) undertook the first revision in 2015, aligning the limits with contemporary business realities. The paid-up capital ceiling was raised to ₹5 crore, and the turnover cap was increased to ₹20 crore. This change allowed a broader segment of private companies to benefit from simplified compliance norms, such as relaxed board meeting requirements and reduced financial reporting obligations.

Subsequent revisions followed to accommodate growth. In 2021, limits were adjusted to ₹2 crore (capital) and ₹20 crore (turnover), followed by a major update in September 2022, when the MCA adjusted the thresholds to ₹4 crore in paid-up capital and ₹40 crore in annual turnover. This was a response to growing demand from industry bodies and MSME associations for greater inclusivity, especially as many mid-sized enterprises found themselves excluded despite operating with limited resources.

The latest amendment in 2025 marks the most significant expansion yet. Effective 1 December 2025, the MCA has revised the financial criteria under Rule 2(1)(t) of the Companies (Specification of Definitions Details) Rules, 2014, as amended via G.S.R. 880(E), dated 1 December 2025.

“A company with paid-up capital not exceeding ₹10 crore and annual turnover not exceeding ₹100 crore, which is neither a public company nor a subsidiary or holding company, shall be classified as a small company.”
(MCA Notification G.S.R. 880(E), 1 December 2025)

This tripling of the turnover limit and more than doubling of the capital threshold acknowledges that many businesses today operate at a scale far beyond the original 2013 benchmarks, yet still lack the infrastructure and resources of large corporates. By redefining “small,” the MCA ensures that more enterprises can access lighter compliance frameworks, fostering ease of doing business without compromising accountability.

Importantly, the core eligibility conditions remain unchanged:
– The company must be a private limited entity.
– It must not be a subsidiary or holding company.
– It must not be a public company (even if unlisted).

These safeguards ensure that the benefits of the small company classification are targeted at genuine small and mid-sized enterprises, rather than being exploited by larger corporate groups through restructuring.

Key Changes & Official Notifications.

The MCA has formalized the revised thresholds through Notification G.S.R. 880(E) dated 1 December 2025, amending Rule 2(1)(t) of the Companies (Specification of Definitions Details) Rules, 2014. The changes, effective 1 December 2025, mark the most significant expansion of small-company eligibility since the Companies Act, 2013 was enacted.

The notification explicitly redefines a small company under Section 2(85) of the Act as a non-public, non-subsidiary entity meeting the following criteria:
– Paid-up capital not exceeding ₹10 crore (up from ₹4 crore).
– Annual turnover not exceeding ₹100 crore (up from ₹40 crore).

“A company which is not a public company, subsidiary, or holding company shall be deemed a small company if its paid-up capital is ≤ ₹10 crore and turnover ≤ ₹100 crore.”
(MCA Notification G.S.R. 880(E), 1 December 2025)

Critical Implications of the Amendment:

• Exclusions remain unchanged: Public companies, subsidiaries, and holding companies are ineligible for small-company status, regardless of financial metrics.
• Transition benefits: Entities that previously exceeded the ₹4Cr/₹40Cr limits but now fall within the ₹10Cr/₹100Cr range can immediately claim compliance relief, including simplified filings and audit relaxations.
• No retrospective effect: The new thresholds apply only to financial years beginning on or after 1 December 2025. Companies must reassess eligibility at the end of each fiscal year.
• Dual criteria must be met: Both capital and turnover limits must be satisfied simultaneously. A company with ₹9 crore capital but ₹120 crore turnover does not qualify.

The amendment also clarifies that automatic reclassification does not occur—companies must proactively verify their status and may need to file board resolutions or updated forms to claim the new relaxations.

Comparative Analysis: Old vs. New Thresholds.

The latest revision marks a quantum leap in financial eligibility criteria, nearly 2.5x higher than the 2022 standards. The table below highlights the stark contrast between the pre-2025 and post-2025 regimes:

Key Takeaways from the Shift:

• Broader eligibility: The new thresholds extend relief to companies previously disqualified due to marginal breaches (e.g., a firm with ₹42 crore turnover now qualifies).
• Compliance parity: Mid-sized businesses (e.g., regional manufacturers, tech startups) gain near-MSME-level relaxations, reducing administrative costs.
• Legal clarity: The amendment explicitly retains exclusions for public companies, subsidiaries, and holding companies, ensuring the benefits target genuine small enterprises.

The revised limits align with inflationary trends and the growing scale of Indian SMEs. For instance:

• A company with ₹9 crore capital and ₹90 crore turnover (previously non-compliant) can now opt for simplified filings under Rule 10 of the Companies (Accounts) Rules, 2014.
• Internal audit exemptions (under Section 138) apply unless turnover exceeds ₹100 crore, a significant relief for businesses in sectors like retail, logistics, and SaaS.

“The amendment ensures that small companies are not burdened with disproportionate compliance, fostering a culture of ease of doing business.”
— MCA Notification G.S.R. 880(E), 1 December 2025

The changes also bridge gaps with other regulatory frameworks. For example:

• While GST e-invoicing (₹5 crore threshold) and tax audits (Section 44AB, ₹10 crore turnover) remain unchanged, the new MCA limits create synergies for businesses to streamline cross-compliance.
• Startups and MSMEs can now leverage dual benefits—MCA relaxations and sector-specific incentives (e.g., Startup India’s IPR subsidies).

Benefits & Compliance Relief for Small Companies.

The revised thresholds unlock a transformative compliance relief framework, aligning with the government’s vision to reduce regulatory friction for growing businesses. Below are the key benefits now available to qualifying entities.

Reduced Filings & Audit Obligations.

• No mandatory internal audit (under Section 138) unless annual turnover exceeds ₹100 crore or paid-up capital crosses ₹50 crore. This exemption was previously limited to companies with turnover under ₹40 crore.
• Simplified annual return (Form MGT-7): Reduced disclosure requirements, including fewer details on shareholding patterns and director appointments.
• Exemption from Form AOC-4 (XBRL): Small companies with turnover ≤ ₹50 crore or paid-up capital ≤ ₹5 crore are exempt from XBRL financial reporting.

Financial Reporting Flexibilities.

• Cash flow statement optional: Companies with turnover ≤ ₹50 crore need not prepare a cash flow statement (under Schedule III of the Act).
• Audit exemptions for specific transactions: Small companies are exempt from auditor attestation for certain inter-corporate loans or guarantees (subject to conditions under Section 185).

Operational & Governance Relaxations.

• No company secretary requirement: If paid-up capital is ≤ ₹5 crore, small companies are exempt from appointing a company secretary (under Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014).
• Reduced board meetings: Only two board meetings per year (instead of four) are mandatory, with a gap of no more than 120 days between meetings (Section 173).
• Flexible AGM timelines: Small companies can hold their Annual General Meeting (AGM) within 9 months of the financial year-end (vs. 6 months for others), easing planning constraints.

These relaxations lower the cost of compliance while incentivizing formalization. For instance, a manufacturing SME with ₹8 crore paid-up capital and ₹80 crore turnover—previously classified as a “non-small” company—now qualifies for exemptions, saving lakhs in audit and secretarial fees. However, companies must proactively assess eligibility and ensure they meet the non-public, non-subsidiary criteria to avoid inadvertent non-compliance.

Sector-Specific Implications & Challenges.

The revised thresholds will have far-reaching effects across sectors, particularly for MSMEs, startups, and mid-sized enterprises. However, the changes also introduce nuanced challenges that businesses must navigate strategically.

Opportunities for MSMEs & Startups.

• Formalization & Credit Access: With more companies qualifying as “small,” MSMEs can leverage relaxed compliance norms to secure formal financing (e.g., MSME loans, CGTMSE guarantees) without the burden of stringent filings.
• Government Schemes: Eligibility for Startup India benefits, tax holidays (Section 80-IAC), and subsidized registrations will expand, fostering innovation.
• Operational Flexibility: Reduced board meeting requirements and optional cash flow statements free up resources for core operations.

Audit & Taxation Crossroads.

While the MCA’s move reduces corporate compliance, other regulatory thresholds remain unchanged, creating a dual-track system:
– GST E-Invoicing: Mandatory for businesses with turnover > ₹5 crore (per CGST Rule 48), independent of the new small-company limits.
– Tax Audits: Section 44AB of the Income Tax Act still mandates audits for turnover exceeding ₹10 crore (or ₹1 crore for professionals), meaning many “small companies” may still face tax scrutiny.
– Internal Audit: Though exempt under the Companies Act (unless turnover > ₹100 crore), SEBI regulations or lender covenants may require it for listed subsidiaries or loan agreements.

Risks & Anti-Abuse Considerations.

• Structural Gaming: Larger firms may attempt to split entities or restructure ownership to exploit small-company benefits (e.g., avoiding internal audits or CSR obligations). The MCA may need to introduce anti-avoidance clauses (similar to Section 44AB’s “aggregate turnover” concept).
• Compliance Gaps: Companies near the ₹10 crore capital/₹100 crore turnover thresholds must monitor yearly fluctuations to avoid sudden loss of small-company status, triggering additional filings.
• State-Level Variations: Some states (e.g., Maharashtra, Karnataka) offer additional incentives for small companies, but eligibility criteria may not align with the MCA’s revised limits.

Sector-Specific Nuances.

• Manufacturing: Units with high turnover but low capital (e.g., contract manufacturers) gain the most from the ₹100 crore turnover cap.
• IT/Service Startups: Often capital-light but revenue-heavy, these firms can now access relaxations without diluting equity.
• Subsidiaries: Even if meeting thresholds, subsidiaries of public companies remain ineligible, limiting benefits for corporate groups.

In summary, while the amendments lower barriers to growth, businesses must align MCA compliance with GST, tax, and sector-specific rules to fully capitalize on the relief. Proactive planning—such as annual eligibility reviews and stakeholder consultations—will be critical to avoid unintended compliance pitfalls.

The upward revision of small company thresholds by the MCA marks a transformative shift for India’s MSME sector, directly benefiting taxpayers by unlocking lighter compliance burdens, reduced filing requirements, and exemptions from certain audits and board reporting norms. With the paid-up capital limit now at ₹10 crore and turnover at ₹100 crore, a significantly larger pool of businesses can leverage the simplified regulatory framework under the Companies Act, 2013—cutting costs, easing administrative strain, and improving operational agility.

This move not only aligns with the government’s ease-of-doing-business vision but also empowers small enterprises to redirect resources toward growth, innovation, and scalability, while remaining compliant under a more accommodating regime. Taxpayers should proactively assess eligibility and plan compliance strategies to maximize these benefits, ensuring long-term sustainability in a competitive market.

Frequently Asked Questions (FAQs) on New Small Company Thresholds 2025

Disclaimer: The information provided in this article is for general informational purposes only and does not constitute legal, financial, or professional advice. While every effort has been made to ensure accuracy, laws and regulations are subject to change. Readers are advised to consult a qualified Company Secretary (CS) or Chartered Accountant (CA) or refer to the official Ministry of Corporate Affairs (MCA) notifications before making any business decisions.

References & Official Sources:

• 🔹 Ministry of Corporate Affairs (MCA) Official Website
• 🔹 Companies Act, 2013 (Official E-Book)
• 🔹 MCA Notifications & Updates

C.K. Gupta

Hello, I am C.K. Gupta owner of Taxgst.in, a seasoned finance professional with a Master of Commerce degree and over 20 years of experience in accounting and finance. My extensive career has been dedicated to mastering the intricacies of financial management, tax consultancy, and strategic planning. Throughout my professional journey, I have honed my skills in financial analysis, tax planning, and compliance, ensuring that all practices adhere to the latest financial regulations. My expertise also extends to auditing, where I focus on maintaining accuracy and integrity in financial reporting. I am passionate about using my knowledge to provide insightful and reliable financial advice, helping businesses optimize their financial strategies and achieve their economic goals. At Taxgst.in, I aim to share valuable insights that assist our readers in navigating the complex world of taxes and finance with ease.