MCA Redefines Small Companies: Capital Limit Raised to ₹10 Crore, Turnover to ₹100 Crore
New thresholds to ease compliance for startups and MSMEs
Amendment expands benefits of reduced filings and lower regulatory costs
By Our Legal Correspondent
New Delhi: December 04, 2025:
In a major reform for India’s corporate sector, the Ministry of Corporate Affairs (MCA) has revised the definition of a small company under the Companies Act, 2013. The updated thresholds, notified on December 1, 2025, raise the paid-up capital limit to ₹10 crore and the turnover limit to ₹100 crore.
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This move is expected to benefit thousands of startups and micro, small, and medium enterprises (MSMEs) by reducing their compliance burden and lowering regulatory costs.
What Has Changed?
- Earlier limits: Paid-up capital up to ₹4 crore and turnover up to ₹40 crore.
- New limits: Paid-up capital up to ₹10 crore and turnover up to ₹100 crore.
- Applicability: Both conditions must be satisfied simultaneously for classification as a small company.
This amendment was made through Notification G.S.R. 880(E), revising the Companies (Specification of Definition Details) Rules, 2014.
Benefits for Startups and MSMEs
The new definition brings several advantages:
- Simplified compliance: Small companies enjoy exemptions from complex board meetings, reduced filing requirements, and simplified auditing.
- Lower costs: Compliance costs, including statutory filings and professional fees, are significantly reduced.
- Ease of doing business: Encourages entrepreneurship by making regulatory processes less burdensome.
- Access to benefits: More companies can now qualify for government schemes and incentives targeted at small businesses.
Why This Matters
India’s startup ecosystem has grown rapidly, with over 100,000 registered startups and millions of MSMEs contributing nearly 30% of GDP. However, compliance costs and regulatory hurdles often discourage small businesses.
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By expanding the definition of small companies, the MCA has:
- Aligned rules with economic realities of inflation and business growth.
- Encouraged formalization of small enterprises.
- Reduced litigation by clarifying thresholds.
Industry Reactions
- Legal experts have welcomed the move, noting that it will reduce unnecessary compliance for companies that are not large enough to justify heavy regulation.
- Startup founders say the change will allow them to focus more on growth and innovation rather than paperwork.
- MSME associations believe the amendment will help businesses scale faster without being burdened by corporate governance costs.
Historical Context
The definition of small company has been revised multiple times:
- 2013: Original limits were ₹50 lakh capital and ₹2 crore turnover.
- 2021: Raised to ₹2 crore capital and ₹20 crore turnover.
- 2022: Further raised to ₹4 crore capital and ₹40 crore turnover.
- 2025: Now raised to ₹10 crore capital and ₹100 crore turnover.
This progressive expansion reflects the government’s commitment to supporting small businesses.
Challenges Ahead
While the amendment is positive, experts caution:
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- Awareness gap: Many small businesses remain unaware of compliance relaxations.
- Implementation: Effective communication and training are needed to ensure companies benefit.
- Overlap with MSME definitions: Different laws define MSMEs differently, creating confusion.
Conclusion
The MCA’s updated definition of small companies is a landmark step in India’s corporate governance reforms. By raising capital and turnover limits, the government has expanded the scope of businesses eligible for reduced compliance.
This change will ease the burden on startups and MSMEs, encourage entrepreneurship, and strengthen India’s position as a global hub for innovation and small business growth.
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