Notification No. G.S.R. 880(E) | Effective 01 December 2025
By CA Surekha S Ahuja
The Ministry of Corporate Affairs has issued the Companies (Specification of Definition Details) Amendment Rules, 2025, significantly widening the category of Small Companies under Section 2(85) of the Companies Act, 2013.
Revised Thresholds for Small Companies
| Criteria | Earlier Limit | Revised Limit (Effective 01.12.2025) |
|---|---|---|
| Paid-up Capital | ≤ ₹4 crore | ≤ ₹10 crore |
| Turnover (preceding FY) | ≤ ₹40 crore | ≤ ₹100 crore |
Mandatory ‘AND’ Condition for Classification
A company will be treated as a Small Company only if both limits are satisfied:
| Condition | Requirement |
|---|---|
| Paid-up Capital | Must be ≤ ₹10 crore |
| Turnover | Must be ≤ ₹100 crore (preceding FY) |
| Interpretation | Both conditions must be met together (AND condition) |
Even if one condition is breached, the company does not qualify as a Small Company.
Complete Benefits & Exemptions for Small Companies
| Benefit / Exemption | Provision | Advantage |
|---|---|---|
| Abridged Board’s Report | Rule 8A | Simplified reporting, fewer disclosures |
| No Cash Flow Statement | Schedule III exemption | Reduced audit & reporting burden |
| Lower Penalties (50% reduction) | Section 446B | Reduced financial exposure for non-compliance |
| Only Two Board Meetings per year | Section 173(5) | Ease of management for closely-held entities |
| No IFC reporting by auditors | CARO exemption | Lower audit complexity |
| No Auditor Rotation | Section 139(2) exemption | Cost savings and stability |
| Relaxed disclosures | Rules 5, 8 exemptions | Less documentation and compliance work |
| CSR not applicable | Outside Section 135 thresholds | No CSR reporting or spend |
| Easy Strike-Off / Closure | Section 248 | Quicker exit process |
| Eligible for Fast-Track Merger | Section 233 | NCLT-free merger, faster approval |
Who Benefits Most?
| Category of Companies | Why They Benefit |
|---|---|
| MSMEs | Lower compliance cost and simpler governance |
| Family Businesses | Simpler reporting structure |
| Startups | Compliance-light environment as they scale |
| Professional firms (CA/Legal/Consulting) | Easier corporate structure maintenance |
| Manufacturing & Trading Units | Flexibility in growth without extra compliance |
Conclusion
With G.S.R. 880(E), companies meeting both conditions —
Paid-up Capital ≤ ₹10 crore AND Turnover ≤ ₹100 crore —
will now enjoy reduced compliance, lower penalties, simplified reporting, and faster restructuring routes.
This is one of the most impactful ease-of-doing-business reforms for small and growing companies in recent years.
