Companies Act · Definitions
Small Company Definition — The Current Limits, and What They Do and Do Not Change
“Small company” is the status that gives a private company the lightest version of the Companies Act — and the limits changed on 1 December 2025. Many pages still show the old figures. This is the current definition, what it gets you, and the rules it does not switch off.
Short answer
A small company is a company, other than a public company, whose paid-up share capital does not exceed ₹10 crore and whose turnover does not exceed ₹100 crore. Both limits must be met. Turnover is read from the profit and loss account for the immediately preceding financial year.
Holding and subsidiary companies, section 8 companies and companies governed by a special Act are never small companies, whatever their size. These limits have applied since 1 December 2025 (notification G.S.R. 880(E)); before that they were ₹4 crore and ₹40 crore. A Bill that would raise them again is pending and is not law.
The definition: two tests, both must be met
Section 2(85) of the Companies Act, 2013 defines a small company, and the Central Government sets the limits by rule — rule 2(1)(t) of the Companies (Specification of Definitions Details) Rules, 2014. Since 1 December 2025 a company is a small company if it is a company other than a public company and it meets both of these:
- Paid-up share capital does not exceed ₹10 crore; and
- Turnover, as per its profit and loss account for the immediately preceding financial year, does not exceed ₹100 crore.
Cross either limit and you are not small. Two companies can fail the test for opposite reasons: a company with ₹2 crore of paid-up capital and ₹120 crore of turnover is not small, and neither is one with ₹12 crore of paid-up capital and ₹5 crore of turnover.
Size is not enough on its own. Even inside the limits, the following are never small companies: a holding company or a subsidiary company; a company registered under section 8; and a company or body corporate governed by any special Act.
One structural point explains why a Bill is needed to move the limits again. Section 2(85) itself starts from ₹50 lakh of paid-up capital and ₹2 crore of turnover and lets the Government prescribe higher amounts only up to ₹10 crore and ₹100 crore. The rules now sit exactly at that ceiling, so a further rise needs the Act to be amended rather than a fresh notification.
How the limits have moved
| From | Paid-up capital | Turnover | Basis |
|---|---|---|---|
| September 2022 | ₹4 crore | ₹40 crore | Amendment to the 2014 Definitions Rules |
| 1 December 2025 | ₹10 crore | ₹100 crore | Notification G.S.R. 880(E), 1 December 2025 — in force |
| Proposed, not law | ₹20 crore | ₹200 crore | Corporate Laws (Amendment) Bill, 2026, clause 18 — pending |
Older websites still quote ₹4 crore and ₹40 crore. If a page on this topic does not mention 1 December 2025, treat it as out of date.
Pending change — not law
The Corporate Laws (Amendment) Bill, 2026 was introduced in the Lok Sabha on 23 March 2026 and referred to a Joint Parliamentary Committee, which presented its report on 3 August 2026. We found no indication that it has been passed as of 1 October 2026. According to published summaries, clause 18 would raise the small-company limits to ₹20 crore of paid-up capital and ₹200 crore of turnover.
The committee’s published report summary does not address the small-company limits either way, so there is no signal from it. Until the Bill is enacted and notified, ₹10 crore and ₹100 crore are the law. We will update this page when that changes.
How the test is applied — and what we could not confirm
Both limits are tested together, and turnover comes from the profit and loss account of the immediately preceding financial year. That is why a company’s status can change from one year to the next as its figures change.
Where this page is firm: the two limits, the exclusions, and the 1 December 2025 date. Where it is not: the sources we read do not state the date on which paid-up capital is measured, and none of them mentions a transition rule for financial years that straddle 1 December 2025. Many companies simply use their latest financial statements. If your figures sit close to a limit, or your FY 2025-26 accounts are being finalised now, confirm the treatment with your auditor before relying on small-company relief.
What small-company status gets you
These reliefs all hang on the one definition, which is why the December 2025 change matters:
| Provision | What changes for a small company | Note |
|---|---|---|
| Cash flow statement (s.2(40)) | Not required as part of the financial statements | |
| Board meetings (s.173(5)) | Two a year — one in each half, at least 90 days apart | The 2026 Bill proposes cutting this to one a year; not law |
| Annual return (s.92) | Abridged return in MGT-7A, signed by the company secretary or, if there is none, a director | MGT-7A guide; see the MGT-8 overlap below |
| Auditor rotation (s.139(2)) | Does not apply — rule 5 excludes OPCs and small companies | Rotation explained |
| Penalties (s.446B) | Where a penalty is payable, not more than one-half of it, capped at ₹2 lakh for the company and ₹1 lakh for an officer in default | Also covers OPCs, start-ups and producer companies |
| Auditor’s report (CARO 2020) | The Order does not apply to a One Person Company or a small company | Ask your auditor how FY 2025-26 is being treated |
| Internal financial controls reporting (s.143(3)(i)) | The auditor need not report on it for a One Person Company or a small company | MCA notification G.S.R. 583(E), 13 June 2017 |
The wider definition extends these reliefs to companies that were previously just outside it. It does not remove the audit itself: every company still appoints an auditor under section 139. (A pending Bill would let the Government exempt prescribed classes of companies from appointing an auditor; that is not law either.)
Look-alike thresholds that are not the small-company test
Some reliefs have their own numbers and are easily mistaken for small-company status:
- Internal financial controls reporting for private companies. A private company that is not small can still be exempt if its turnover is below ₹50 crore and its borrowings are below ₹25 crore, and it has not defaulted in filing its financial statements or annual return. That comes from notification G.S.R. 583(E), read with MCA’s July 2017 clarification that the two conditions are cumulative.
- CARO 2020 for other private companies. The Order has a separate exemption for certain private companies, defined by its own conditions. It is not the same thing as being a “small company”; read paragraph 1 of the Order rather than assuming one implies the other.
What a small company does not escape
“Small” does not switch off the larger-company rules. Several run on their own thresholds, and a small company can be caught by them:
- MGT-8. Rule 11(2) requires a practising company secretary’s certificate at turnover of ₹50 crore or more, or paid-up capital of ₹10 crore or more, and it has no small-company exception. A small company can have turnover up to ₹100 crore, or paid-up capital of exactly ₹10 crore. That overlap is unresolved. Read the MGT-8 page.
- XBRL. Filing financial statements in XBRL applies at paid-up capital of ₹5 crore or more or turnover of ₹100 crore or more, so a small company with ₹5–10 crore of paid-up capital is caught. XBRL explained.
- Whole-time company secretary. A private company with paid-up capital of ₹10 crore or more needs one. The small-company limit is “does not exceed ₹10 crore”, so a company at exactly ₹10 crore is both small and caught. Whole-time CS explained.
- Cost audit. It turns on sector and turnover, not company size; small-company status is not an exemption. (Micro and small enterprises under the MSME classification are a separate test.) Cost audit explained.
- Auditor appointment. Rotation is excluded, but a small company still files ADT-1 within 15 days of appointing its auditor. ADT-1 explained.
The thresholds-at-a-glance table puts all of these side by side.
Small company, One Person Company and small LLP are three different things
Many provisions give a One Person Company and a small company the same relief, but an OPC is a separate category and is not defined by the small-company limits. A small LLP is a different test under a different Act — contribution up to ₹25 lakh and turnover up to ₹40 lakh — and an LLP is never a “small company”. See Small Company vs Small LLP.
FAQ
What is the limit for a small company in 2026?
Paid-up share capital up to ₹10 crore and turnover up to ₹100 crore, both required, for a company that is not a public company. In force since 1 December 2025 (G.S.R. 880(E)). A Bill that would raise the limits to ₹20 crore and ₹200 crore is pending and is not law.
Is every private limited company a small company?
No. It must meet both limits, and a private company that is a holding or subsidiary company is excluded however small it is.
Can a subsidiary be a small company?
No. A holding company or a subsidiary company is excluded from the definition.
What were the limits before December 2025?
₹4 crore of paid-up capital and ₹40 crore of turnover, which applied from September 2022.
Does a public company qualify as a small company?
No. The definition applies only to a company other than a public company.
Does a small company file MGT-7A?
Yes — the abridged return rather than MGT-7. The open question is MGT-8 for a small company with turnover of ₹50 crore or more, or paid-up capital of exactly ₹10 crore; see the MGT-8 page.
Is a small company exempt from audit?
No. Every company appoints an auditor under section 139. Small companies are excused from auditor rotation and from some reporting requirements, not from the audit itself. A pending Bill would let the Government exempt prescribed classes of companies from appointing an auditor; it is not law.
Which year’s turnover decides it?
As the rule is worded, the profit and loss account for the immediately preceding financial year.
Related
- Form MGT-8 — who needs it, and the small-company overlap
- Companies Act thresholds at a glance
- How to file Form MGT-7A — line by line
- Annual compliance checklist — AOC-4 and MGT-7A
- Small company vs small LLP (llpconsultant.com)
Sources: Companies Act, 2013, sections 2(85), 2(40), 173(5), 92, 139, 143(3)(i) and 446B; Companies (Specification of Definitions Details) Rules, 2014, rule 2(1)(t) as amended by Ministry of Corporate Affairs notification G.S.R. 880(E) dated 1 December 2025; Companies (Audit and Auditors) Rules, 2014, rule 5; MCA notification G.S.R. 583(E) dated 13 June 2017; CARO 2020; Corporate Laws (Amendment) Bill, 2026 and the report of the Joint Parliamentary Committee presented on 3 August 2026, as summarised by PRS Legislative Research and professional commentary. Several points were confirmed from professional summaries of the notification rather than the gazette text; where a point could not be confirmed this page says so.
Position as at 1 October 2026, based on section 2(85) of the Companies Act, 2013 and rule 2(1)(t) as amended on 1 December 2025. Guidance, not legal advice.