Small Company Threshold Now ₹10 Crore Capital and ₹100 Crore Turnover: Which Private Limited Companies Just Got Lighter Compliance

On 1 December 2025 the Ministry of Corporate Affairs notified the Companies (Specification of Definition Details) Amendment Rules, 2025 as G.S.R. 880(E), raising the limits that make a private company a "small company" under section 2(85) of the Companies Act, 2013. Paid-up share capital may now be up to ten crore rupees, from four crore, and turnover for the preceding financial year up to one hundred crore rupees, from forty crore. Both limits are the maximum the Act itself permits the government to prescribe, so this is the ceiling of the concession. The change took effect on the date of notification, so the accounts for the year ended 31 March 2026, being finalised and filed this quarter, are the first annual filings in which a company between the old and new limits files as a small company.

The definition, and who is excluded

A small company is a company other than a public company whose paid-up share capital does not exceed the prescribed limit and whose turnover, as per the profit and loss account for the immediately preceding financial year, does not exceed the prescribed limit. Both conditions must be met at once. Section 2(85) then excludes four kinds of company regardless of size: a holding company or a subsidiary of any company, a company registered under section 8, and a company or body corporate governed by a special Act. A subsidiary of a foreign parent, a section 8 not-for-profit and any public company therefore remain outside the definition however small their numbers. Because turnover is tested on the preceding year, a company that crossed one hundred crore in 2025-26 loses the status for 2026-27, and a company that fell back under it regains it the following year.

What a small company is spared

• Board meetings: section 173(5) allows two meetings a year, at least ninety days apart, instead of four.
• Cash flow statement: excluded from the definition of financial statements in section 2(40), so the annual accounts are a balance sheet, profit and loss account and notes.
• Annual return: the abridged Form MGT-7A under the proviso to section 92(1), signed by a director alone where there is no company secretary, instead of MGT-7.
• Auditor rotation: section 139(2) on mandatory rotation of auditors does not apply.
• Board's report: the abridged report under Rule 8A of the Companies (Accounts) Rules, 2014.
• CARO: the Companies (Auditor's Report) Order, 2020 does not apply, so the auditor's report omits the CARO annexure.
• Penalties: under section 446B, a small company and its officers pay not more than half the penalty specified for the default, capped at two lakh rupees for the company and one lakh for an officer in default.
• Mergers: the fast-track route under section 233 is open between two or more small companies, through the Regional Director rather than the Tribunal.

What does not change

Small company status is a set of exemptions, not a different form of company. Statutory audit remains mandatory for every company whatever its size. AOC-4 and the annual return are still filed within thirty and sixty days of the AGM, the AGM must still be held within six months of year end, director KYC still runs on its three-year cycle, and the registers, resolutions and minutes under sections 88 to 118 are still required. The company is also still liable to tax audit, GST and MSME reporting on their own thresholds, none of which reads the Companies Act definition. What the amendment removes is a layer of process, two board meetings, a cash flow statement, the CARO annexure and a longer annual return, and halves the exposure to Companies Act penalties.

Who newly qualifies

The companies affected are those with paid-up capital between four and ten crore or turnover between forty and one hundred crore, that are neither subsidiaries nor holding companies. In Kerala that describes a large part of the second tier: mid-sized spice and food processors, plywood and rubber-product manufacturers, hospitals and diagnostic chains structured as private companies, construction and interior-fit-out firms and the larger IT services companies in Infopark and Technopark that have not taken outside investors. A company that raised capital from a fund and is now a subsidiary of a holding structure does not qualify, and a company that issued shares above ten crore to a promoter family also drops out; the capital test looks at paid-up capital, not at premium.

What to do at this year's filing

1. Confirm the turnover figure in the audited profit and loss account for 2024-25 and the paid-up capital as at 31 March 2026, and record the small-company determination in the board minutes.
2. Tell the auditor before the audit report is signed: the CARO annexure and the cash flow statement come out, and the auditor's report format changes.
3. File MGT-7A, not MGT-7, and use the abridged board's report; a company that files the long forms is not penalised, but it has done work it did not need to.
4. Plan two board meetings for 2026-27 rather than four, keeping the ninety-day gap and the section 173 notice.
5. Re-test the status every year after the accounts are closed, since a good year's turnover switches the company back to full compliance for the year that follows.

Frequently Asked Questions

Sources

Ministry of Corporate Affairs, Companies (Specification of Definition Details) Amendment Rules, 2025, G.S.R. 880(E) dated 1 December 2025; Companies Act, 2013, sections 2(40), 2(85), 92, 139, 173, 233 and 446B; Companies (Accounts) Rules, 2014, Rule 8A; Companies (Auditor's Report) Order, 2020, paragraph 1(2). Check the notification text against your own capital and turnover before changing a filing.

BookMyTM prepares annual filings, board minutes and registers for private limited companies across Kerala and reviews whether each client qualifies as a small company for the year.