The definition of “small company” under Section 2(85) of the Companies Act, 2013 has been revised with effect from 1 December 2025 to substantially increase the paid-up capital and turnover thresholds, thereby expanding the universe of companies eligible for a lighter compliance regime. The change has been brought in through the Companies (Specification of Definition Details) Amendment Rules, 2025, notified by MCA vide G.S.R. 880(E) dated 1 December 2025, and takes effect from the date of its publication in the Official Gazette.
Section 2(85) of the Companies Act, 2013 defines a small company in terms of (a) paid-up share capital and (b) turnover, while expressly excluding public companies, holding and subsidiary companies, Section 8 companies and companies/body corporates governed by any special Act. The Central Government is empowered under Section 469(1)–(2) to prescribe and modify the quantitative parameters of this definition through rules, which is done via Rule 2(1)(t) of the Companies (Specification of Definition Details) Rules, 2014.
By substituting clause (t) of Rule 2(1), the revised rule now provides that, for the purposes of sub‑clauses (i) and (ii) of Section 2(85), the paid‑up capital and turnover of a small company shall not exceed ₹10 crore and ₹100 crore respectively. These amended thresholds are operative from 1 December 2025, i.e., the date of publication of G.S.R. 880(E) in the Official Gazette, and apply prospectively to classification of companies for periods and compliances determined with reference to that date.
Prior to this amendment, following the 2022 revision (G.S.R. 700(E)), the small company limits stood at paid‑up share capital not exceeding ₹4 crore and turnover not exceeding ₹40 crore, checked with reference to the immediately preceding financial year. The 2025 amendment more than doubles both thresholds to ₹10 crore capital and ₹100 crore turnover, continuing the policy trend from earlier limits of ₹2 crore and ₹20 crore and thereby bringing a significantly larger cohort of private companies within the small company bracket.
A company will qualify as a small company only if it simultaneously satisfies both the revised financial conditions (paid‑up capital ≤ ₹10 crore and turnover ≤ ₹100 crore) and is not hit by any of the statutory exclusions under the proviso to Section 2(85). Accordingly, public companies, holding or subsidiary companies (even of small companies), Section 8 companies, and entities governed by special Acts remain outside the ambit of the revised small company definition despite meeting the revised financial thresholds.
The enhanced thresholds mean many more MSMEs and emerging private companies now qualify as small companies, enabling them to access relaxations such as fewer board meetings, abridged directors’ report, simplified financial statement formats, reduced disclosure requirements and lower penalties where specifically provided. By aligning quantitative norms with current business scales and inflation, the amendment is expected to reduce compliance costs, ease the regulatory burden on growth‑stage entities and support the government’s broader “ease of doing business” and formalisation objectives.