MCA Amends Small Company Definition, Raises Threshold Limits: Know its Impact [Read Notification]

The Ministry of Corporate Affairs (MCA) has issued Notification G.S.R. 880(E) dated 1 December 2025 announcing an important update to the definition of a small company under the Companies Act, 2013.

The notification amends the Companies (Specification of Definition Details) Rules, 2014 and introduces higher thresholds for determining which companies qualify as small companies.

The amended rule replaces the earlier clause in Rule 2, sub-rule 1. The new clause now states:

“Paid up capital and turnover of the small company shall not exceed rupees ten crores and rupees one hundred crores respectively.”

This revision becomes effective from the date of publication in the Official Gazette.

Before this change, the definition of a small company was based on much lower financial limits. The earlier clause had stated:

“Paid up capital and turnover of the small company shall not exceed rupees four crore and rupees forty crore respectively.”

These earlier limits were introduced through the amendment previously issued on 15 September 2022.

The new thresholds are expected to provide substantial relief to a larger number of micro, small and growing businesses across India. Small companies enjoy several compliance benefits such as reduced filing fees, lesser penalties, simplified annual returns and relaxed board meeting requirements.

By increasing the financial ceilings, the government aims to ensure that more companies can continue to operate under the small company framework even as their capital base and turnover grow.

Impact

This amendment is particularly beneficial for start-ups and expanding businesses that often face rising operational costs and compliance obligations as they scale. The higher limits allow such companies to retain small company benefits for a longer period, supporting smoother operations and better resource planning.

The MCA has issued this amendment under the powers provided by section 469 of the Companies Act, 2013. Companies and compliance professionals are now expected to reassess their classification and update their filings to align with the revised thresholds.

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