Indian companies must complete their annual compliance requirements even when business activity is limited or the company has not generated revenue. However, the type of annual return a company files can depend on its legal classification.
A significant change took effect on 1 December 2025: the Ministry of Corporate Affairs increased the financial thresholds used to determine whether a company qualifies as a small company. The paid-up capital limit increased from ₹4 crore to ₹10 crore, while the turnover limit increased from ₹40 crore to ₹100 crore. The change allows more eligible companies to fall within the small-company definition.
But does your company automatically qualify because its capital and turnover are below these limits? No. The company must also meet the other requirements under Section 2(85) of the Companies Act, 2013. Certain companies, including holding companies, subsidiary companies and Section 8 companies, are excluded from the definition.
The classification matters because eligible small companies can use the abridged annual return in Form MGT-7A, subject to the applicable rules. Choosing the wrong form, however, can cause filing difficulties and may require professional review.
This guide explains the revised small-company definition, the eligibility conditions, the difference between MGT-7 and MGT-7A, and the practical checks to complete before submitting an annual return.
Quick answer: What is the new small-company limit in India?
From 1 December 2025, the prescribed financial limits for a small company are:
| Eligibility measure | Revised limit |
| Paid-up share capital | Not more than ₹10 crore |
| Turnover | Not more than ₹100 crore |
Both financial criteria must be met, and the company must not fall within an excluded category under Section 2(85) of the Companies Act, 2013.
Turnover is assessed with reference to the profit and loss account for the immediately preceding financial year, as stated in the statutory definition. Do not assume that the latest year’s turnover alone settles eligibility without checking the relevant financial-year context and current rules.
What is a small company under the Companies Act, 2013?
A small company is a defined category under Section 2(85) of the Companies Act, 2013. It is not simply a business with a small team, limited customers or modest profits.
The classification is based on the company’s legal status, prescribed financial thresholds and statutory exclusions. A company must be a company other than a public company and meet the relevant paid-up share capital and turnover criteria. It must also be outside the categories specifically excluded by law.
This distinction is important for founders. A startup may have only two directors and a small office but still fail the legal definition. Similarly, a business with a large workforce may potentially meet the financial criteria, although all other conditions must still be checked.
The term “small company” should not be confused with “small enterprise” under the Micro, Small and Medium Enterprises Development framework. The two classifications have different legal purposes and criteria. An enterprise’s Udyam/MSME classification does not automatically establish that it qualifies as a small company under the Companies Act.
What changed on 1 December 2025?
Before the change, the prescribed small-company limits were paid-up share capital of up to ₹4 crore and turnover of up to ₹40 crore. The Companies (Specification of Definition Details) Amendment Rules, 2025 revised the limits to ₹10 crore and ₹100 crore respectively.
The Ministry of Corporate Affairs announced the change as part of efforts to reduce compliance burdens. The new limits may bring companies that previously exceeded one or both thresholds within the financial limits for small-company classification.
Consider a private limited company with paid-up share capital of ₹6 crore and turnover of ₹65 crore. Under the earlier limits, it exceeded both prescribed thresholds. Under the revised limits, it falls within both financial ceilings.
That does not, by itself, confirm that the company qualifies. It must still check whether it is a public company or falls within an excluded category, along with any other applicable conditions.
Practical takeaway: Reassess eligibility using the revised limits rather than relying on an old compliance checklist. Do not change the company’s filing approach until its complete eligibility has been verified.
Does every private limited company qualify?
No. Being a private limited company is not enough.
A private company may meet both financial thresholds but remain excluded from the definition. Section 2(85) specifically excludes:
- A holding company.
- A subsidiary company.
- A company registered under Section 8.
- A company or body corporate governed by a special Act.
Public companies are also outside the definition because Section 2(85) defines a small company as a company other than a public company.
These exclusions matter because the legal relationship between companies can be more important than the size of the business. For example, a private company that is a subsidiary cannot assume that it qualifies merely because its paid-up capital is ₹1 crore and its turnover is ₹5 crore.
Before selecting MGT-7A, review the company’s ownership structure, constitutional status and relevant financial statements. If the company has a parent entity, subsidiaries or a special statutory framework, obtain a specific eligibility assessment.
How do you check whether your company qualifies?
Use the following practical checklist before choosing an annual-return form.
Step 1: Confirm the company type
Check the company’s incorporation records and MCA master data. Confirm whether it is a private company or public company and whether any other legal classification affects eligibility.
Step 2: Check paid-up share capital
Review the company’s latest relevant statutory records and share-capital details. Do not confuse authorised share capital with paid-up share capital. They are different measures.
For example, a company may have authorised share capital of ₹15 crore but paid-up share capital of ₹3 crore. The authorised amount alone does not establish whether it meets the small-company capital test.
Step 3: Check turnover
Review the profit and loss account for the immediately preceding financial year and identify the turnover figure relevant to the statutory test. Ensure that the financial statements relate to the correct year and are consistent with the company’s filing records.
Step 4: Check statutory exclusions
Confirm that the company is not a holding company, subsidiary company, Section 8 company or a company/body corporate governed by a special Act.
Step 5: Check the applicable financial year and current MCA instructions
Do not assume that a change in thresholds means every historical annual return should be filed using a newly selected form. Confirm the rules relevant to the financial year being filed, the company’s eligibility for that period and the latest MCA portal instructions.
Step 6: Document the conclusion
Keep a short eligibility note with the supporting financial figures, company status and the reason for selecting MGT-7 or MGT-7A. This creates a useful record for directors, accountants and compliance professionals.
MGT-7 vs MGT-7A: What is the difference?
MGT-7 and MGT-7A are annual-return forms under the Companies Act framework, but they are not interchangeable at the company’s discretion.
| Point | MGT-7 | MGT-7A |
| General purpose | Annual return for companies other than OPCs and small companies | Abridged annual return for OPCs and small companies |
| Typical relevance | Companies that are not eligible for the abridged form | Eligible OPCs and small companies |
| Selection | Based on applicable statutory classification and filing rules | Requires confirmation that the company meets the applicable eligibility conditions |
| Key risk | Filing it without checking the applicable requirements | Assuming the company qualifies solely because its capital and turnover are low |
The exact form selection must be based on the applicable law, current form instructions and the company’s classification for the relevant filing. An old form-selection rule or a past portal error should not be treated as the definitive position after a regulatory amendment.
Can you use MGT-7A if your company meets the new limits?
Potentially, yes, if the company meets the full statutory definition and the form is applicable to the filing in question. Meeting the financial thresholds is only part of the assessment.
An eligible company should still verify the applicable year, exclusions and MCA filing instructions before submitting the form.
Does the revised definition change AOC-4 requirements?
Not automatically.
MGT-7A relates to the annual return. AOC-4 is associated with filing financial statements under Section 137 of the Companies Act, 2013. These are separate compliance requirements.
A company should not conclude that it no longer needs to file AOC-4 merely because it qualifies as a small company or uses MGT-7A. Financial-statement filing, annual-return filing, statutory audit obligations and other compliance requirements must be assessed separately.
A useful way to organise the annual compliance process is to maintain separate checklist items for:
- Financial statements and the relevant AOC-4 form.
- Annual return and the applicable MGT form.
- Statutory audit and auditor-related requirements.
- AGM and board-related records.
- Other filings that apply to the company’s circumstances.
The small-company classification may affect certain obligations or relaxations under the law, but it is not a blanket exemption from company compliance.
What compliance benefits may apply to small companies?
The Companies Act framework provides certain relaxations for small companies. Depending on the provision and the company’s circumstances, these can include differences in board-meeting requirements, financial-statement presentation, penalties and other compliance obligations.
However, avoid treating “small company” as a universal exemption. Each benefit has its own legal provision, conditions and limitations. Some requirements may continue to apply regardless of the company’s size.
Before relying on a relaxation, identify the relevant section or rule and confirm that the company qualifies for it. For example, eligibility to use MGT-7A does not mean the company can skip the statutory audit or avoid all annual filings.
A practical compliance calendar should list each requirement separately and record whether the relevant small-company provision applies.
Does the definition use turnover, profit or revenue?
The statutory definition refers to turnover as per the profit and loss account for the immediately preceding financial year. Turnover is not the same as profit.
A company could report high turnover and low profit because its operating expenses are substantial. Another company might report a high profit margin on lower turnover. For the small-company test, do not substitute profit for the turnover figure.
Similarly, do not automatically substitute cash received, total assets, authorised share capital or the founder’s investment for the measures specified in the law.
Use the relevant financial statements and accounting records. If the figures are unclear or the company has unusual transactions, obtain advice from its accountant or company secretary before making a classification decision.
What happens if your company’s capital or turnover exceeds a limit?
If either financial criterion exceeds the prescribed limit, the company may fail the financial test for small-company status. But the analysis should be carried out using the relevant statutory definitions, financial-year context and applicable rules.
For example, a company with paid-up share capital of ₹8 crore and turnover of ₹105 crore is within the capital ceiling but exceeds the turnover ceiling. It should not assume that it qualifies based only on its paid-up capital.
Likewise, a company with turnover of ₹60 crore but paid-up capital of ₹12 crore exceeds the capital ceiling.
When a company is near a threshold, document the exact figures and confirm the appropriate treatment for the year concerned. Do not alter or restructure capital simply to reach a threshold without assessing the legal, accounting and commercial consequences.
What should existing companies do after the change?
Existing companies should review their classification rather than automatically changing their filing process.
A sensible review involves:
- Checking the effective date of the amendment.
- Identifying the financial year for which the annual return is being prepared.
- Reviewing the relevant paid-up capital and turnover figures.
- Checking whether any statutory exclusion applies.
- Confirming the applicable MGT form and current MCA instructions.
- Checking whether other annual compliance obligations remain applicable.
- Keeping a written record of the conclusion.
Companies should be particularly careful when filing returns for different financial years. A company’s present-day status should not be used as a shortcut for every historical filing.
The MCA portal may also change form workflows or validation rules. If the portal appears to conflict with the company’s legal assessment, save the error details and seek clarification through the relevant professional or official support channel instead of repeatedly submitting inconsistent forms.
A practical example: Does a growing startup qualify?
Imagine a private limited technology company with paid-up share capital of ₹7 crore and turnover of ₹80 crore. It is not a holding company, subsidiary, Section 8 company or company governed by a special Act.
On those facts, the company falls within the revised financial ceilings. It may qualify as a small company, subject to confirmation of all applicable statutory conditions and the relevant financial-year requirements.
Now consider a second company with paid-up share capital of ₹2 crore and turnover of ₹10 crore, but it is a subsidiary of another company. Even though its financial figures are well below both limits, the statutory exclusion means it cannot rely on the small-company definition in the same way.
These examples show why a proper assessment needs both financial information and legal-structure information.
Common mistakes to avoid
Mistake 1: Checking only turnover. The paid-up capital criterion must also be checked.
Mistake 2: Checking only paid-up capital. Turnover is a separate test.
Mistake 3: Confusing authorised capital with paid-up capital. These are different figures.
Mistake 4: Ignoring exclusions. Holding companies, subsidiaries and other excluded categories cannot rely on the financial thresholds alone.
Mistake 5: Confusing small-company status with MSME registration. These classifications serve different purposes.
Mistake 6: Treating MGT-7A as an exemption from AOC-4. Annual returns and financial statements are separate compliance matters.
Mistake 7: Relying on an old article or checklist. Confirm that the information reflects the amendment effective 1 December 2025.
Mistake 8: Assuming every portal error proves the legal position. Portal validations are important, but a disputed filing issue may require checking the applicable law and official instructions.
Mistake 9: Assuming the new limits automatically apply to every historical filing. Verify the relevant year and rules before choosing a form.
Mistake 10: Assuming a small company has no other compliance obligations. The company must still assess all applicable statutory requirements.
What about MGT-8 certification and MCA V3?
The Institute of Company Secretaries of India published an advisory dated 24 December 2025 concerning MGT-7/MGT-7A certification under the MCA V3 portal. The advisory discussed how MGT-8 certification was being handled in the MGT-7 workflow and recommended an approach for attaching certification-related material, including in relevant MGT-7A cases, pending further clarification or rule changes.
This is a technical area where the latest official position matters. Do not treat an older advisory as a permanent instruction without checking whether MCA has since issued a clarification or changed the forms or filing workflow.
If your filing requires certification or you are uncertain about the applicable requirement, review the latest MCA form instructions and consult a practising company secretary. Keep the relevant version of the form instructions with the filing record.
Frequently asked questions
What is the new small-company limit in India?
From 1 December 2025, the prescribed financial limits are paid-up share capital not exceeding ₹10 crore and turnover not exceeding ₹100 crore. Other statutory conditions and exclusions also apply.
Can a private limited company file MGT-7A?
An eligible private limited company may use MGT-7A if it meets the applicable small-company definition and the form is appropriate for the relevant filing. Being a private limited company alone is not sufficient.
Is MGT-7A compulsory for every small company?
The applicable annual-return form should be selected based on the company’s legal classification and the relevant rules. Confirm eligibility and current form instructions before filing.
Does a small company need to file AOC-4?
Small-company status does not automatically remove the financial-statement filing requirement. AOC-4 obligations must be assessed separately under the applicable law.
Does a company with turnover below ₹100 crore qualify automatically?
No. It must also meet the paid-up capital criterion, be within the applicable legal definition and not fall into an excluded category.
Is an MSME the same as a small company?
No. MSME classification and small-company status under the Companies Act are separate legal classifications with different criteria and purposes.
Can a subsidiary qualify as a small company?
Section 2(85) excludes a subsidiary company from the small-company definition. Financial figures below the thresholds do not override that exclusion.
Does small-company status remove the statutory audit requirement?
Do not assume so. Audit requirements must be checked separately under the applicable provisions of company law.
What if the MCA portal shows the wrong form?
Record the error and check the company’s legal classification, relevant financial year and current MCA instructions. Seek professional or official clarification if the problem remains unresolved.
Where can I verify the revised limits?
Start with the Ministry of Corporate Affairs announcement and the applicable amendment to the Companies (Specification of Definition Details) Rules, 2014. The company’s specific eligibility should then be assessed against the Companies Act and current filing instructions.
Final checklist before filing
Before selecting MGT-7 or MGT-7A, confirm:
- The relevant financial year has been identified.
- The company’s legal type has been checked.
- Paid-up share capital has been verified.
- Turnover has been checked against the relevant financial statements.
- Holding/subsidiary and other statutory exclusions have been reviewed.
- The applicable MGT form has been confirmed.
- AOC-4 and other annual obligations have been assessed separately.
- Current MCA portal instructions have been reviewed.
- Any required professional certification has been checked.
- Supporting records and the form-selection decision have been retained.
Conclusion
The revised small-company thresholds introduced from 1 December 2025 may help more Indian companies qualify for the small-company framework. For eligible companies, this can affect the annual-return form selection and may bring certain compliance relaxations into consideration.
But the decision should never be based on turnover or paid-up capital alone. Check both financial criteria, review the statutory exclusions, identify the relevant financial year and verify the latest MCA instructions before filing.
If you are unsure whether your company qualifies for MGT-7A, FilingPoint can help you review your annual filing requirements and identify the appropriate next steps.
Need help with ROC annual filing? Contact +91 72999 72500 / enquiry@filingpoint.com.
