Published on 1 December 2025, the Ministry of Corporate Affairs (MCA), Government of India, issued a notification G.S.R. 880(E) introducing a major amendment to the definition of a Small Company under the Companies Act, 2013. The notification amends the Companies (Specification of Definition Details) Rules, 2014, bringing substantial changes to the compliance framework for corporate entities across India.
Overview of the Amendment
The revised rule substitutes clause (t) of sub-rule (1) in Rule 2 of the Companies (Specification of Definition Details) Rules, 2014. The updated definition enhances the threshold limits for identifying a Small Company, thereby broadening eligibility and supporting more businesses under simplified regulatory norms.
Revised Financial Threshold for Small Company
According to the notification, the new limits are as follows:
| Particulars | Earlier Limit | Revised Limit (Effective 1 December 2025) |
|---|---|---|
| Paid-up Share Capital | Up to ₹4 Crore | Up to ₹10 Crore |
| Turnover (as per previous audited financial statement) | Up to ₹40 Crore | Up to ₹100 Crore |
Gazette Extract
“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.”
Effective Date
The amended rules take effect immediately from their publication date in the Official Gazette, i.e., 1 December 2025.
Background and Amendment History
The principal rules were initially published in the Gazette of India, Extraordinary, Part-II, Section 3, Sub-section (i), vide G.S.R. 238(E) dated 31 March 2014, and had been amended subsequently, with the last amendment prior to this one issued vide G.S.R. 700(E) dated 15 September 2022. The current amendment continues the government’s initiative toward improving the Ease of Doing Business in India.
Significance of the Amendment
The enhancement of capital and turnover thresholds provides wider access to the Small Company classification, enabling a significantly larger segment of Indian private companies to enjoy regulatory relief and reduced financial and compliance burdens.
Key Benefits to Companies Now Eligible as Small Companies
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Reduced compliance requirements under the Companies Act, 2013.
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Lower penalties for defaults and simplified legal processes.
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Exemption from mandatory internal audit for certain categories.
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No requirement to prepare a cash flow statement as part of financial statements.
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Reduced frequency of board meetings.
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Easier access to financial assistance and government subsidy schemes.
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No obligation to rotate auditors within prescribed timelines.
Purpose and Policy Intent
This amendment is aligned with the Government of India’s broader agenda to promote entrepreneurship, encourage SME and MSME sector growth, simplify corporate governance procedures, and strengthen the economic environment for business scalability.
Conclusion
The revised definition of a Small Company under the Companies Act, 2013 marks a significant step in supporting India’s rapidly expanding business ecosystem. Increasing the paid-up capital limit to ₹10 Crore and turnover threshold to ₹100 Crore will allow more companies to avail themselves of simplified regulatory norms, reduced compliance costs, and improved access to financial resources, ultimately fostering sustainable growth and innovation in the corporate sector.