MCA Update (GSR 880(E), Dated 1 December 2025)

The Ministry of Corporate Affairs (MCA) has issued a new update through Notification G.S.R. 880(E) dated 1 December 2025, revising the criteria for determining what qualifies as a “small company” under Section 2(85) of the Companies Act, 2013. This amendment modifies the Companies (Specification of Definition Details) Rules, 2014 and is effective from 1st December 2025.

Under the newly substituted Rule 2(1)(t), a company will be categorized as a small company if it meets the following financial thresholds:

• Its paid-up share capital is ₹10 crore or less, and
• Its turnover does not exceed ₹100 crore

The notification clearly states that both conditions must be satisfied at the same time for a company to fall under the “small company” classification.

Amendment strengthens the small company framework by formally raising the financial ceiling applicable under sub-clauses (i) and (ii) of Section 2(85), thereby enabling more companies to benefit from reduced statutory compliances and streamlined regulatory requirements.

MINISTRY OF CORPORATE AFFAIRS

NOTIFICATION

New Delhi, the 1st December, 2025

G.S.R. 880(E).— In exercise of the powers conferred by sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules further to amend the Companies (Specification of definition details) Rules, 2014, namely:- 1. Short title and commencement.- (1) These rules may be called the Companies (Specification of Definition details) Amendment Rules, 2025. (2) They shall come into force from the date of their publication in the Official Gazette. 2. In the Companies (Specification of definition details) Rules, 2014, in rule 2, in sub-rule (1), for clause (t), the following clause shall be substituted, namely:- “(t) For the purposes of sub-clause (i) and sub-clause (ii) of clause (85) of section 2 of the Act, paid up capital and turnover of the small company shall not exceed rupees ten crores and rupees one hundred crores respectively.”. [F. No. Policy-01/5/2022-CL-V-MCA] BAIAMURUGAN.D, Jt. Secy.

Note: The principal rules were published in the Gazette of India, Extraordinary, Part-II, Section 3, Sub-section (1), vide number G.S.R. 238(E), dated the 31st March, 2014 and was last amended, vide number 700(E), dated the 15th September, 2022

What Is the New Definition of Small Company?

Under the updated rules, a Small Company is now defined as one that meets both of the following conditions:

1 .  Paid-up Share Capital Limit

• Earlier: Up to ₹4 crore
• Revised: Up to ₹10 crore

2 . Turnover Limit

• Earlier: Up to ₹40 crore
• Revised: Up to ₹100 crore

These limits apply based on the immediately preceding financial year.

This amendment substantially expands the number of companies that now fall under the “small company” category.

Summary of Changes at a Glance

Why Did MCA Change the Limits?

The MCA revised the limits for defining a small company to better support India’s growing business landscape and align regulatory thresholds with current economic realities. Over the years, inflation, increased business activity, and the expanding scale of MSMEs made the earlier limits outdated and restrictive.

By enhancing the capital and turnover thresholds, the government aims to reduce compliance pressure on a larger number of private companies, enabling them to operate more efficiently. This change is also part of the broader Ease of Doing Business initiative, which focuses on simplifying regulations, lowering administrative costs, and encouraging entrepreneurship. Ultimately, the revised limits provide small and emerging businesses with a more flexible and supportive regulatory environment, helping them grow sustainably and remain competitive.

Legal Basis of the Amendment

MCA has substituted clause (t) of Rule 2(1) of the Companies (Specification of Definition Details) Rules, 2014, with the following:

“For the purposes of sub-clause (i) and sub-clause (ii) of clause (85) of section 2 of the Act, the paid-up capital and turnover of the small company shall not exceed ₹10 crores and ₹100 crores respectively.”

The notification comes into force immediately upon publication in the Official Gazette, i.e., 1 December 2025.

Major Benefits of Being Classified as a Small Company

The revised definition of a small company brings several substantial advantages for eligible businesses. One of the biggest benefits is the reduction in compliance requirements, which results in far less paperwork, easier annual filings, and the need for only two board meetings each year. Small companies also enjoy a lighter financial reporting burden, as they are not required to prepare mandatory cash flow statements and can use simplified formats for their balance sheet and profit and loss accounts. Another major advantage is the reduction in penalties under the Companies Act, since small companies face significantly lower fines compared to other companies for similar defaults. Additionally, they are exempt from mandatory auditor rotation, making the audit process simpler and more cost-effective. Decision-making also becomes quicker due to smaller boards and reduced regulatory oversight. Overall, these relaxations help small companies save valuable time, effort, and financial resources, allowing them to allocate more funds toward business growth, expansion, and hiring.

Final Thoughts

The MCA's updated definition of a small company is a significant step toward easing the financial and compliance burden on India’s entrepreneurial ecosystem. By raising the capital and turnover limits, the government has ensured that more businesses gain access to simplified governance frameworks, lower costs, and a more conducive environment to scale and grow.

This amendment reflects India’s progression toward a more business-friendly, MSME-supportive corporate regulatory system.