Introduction
Running a company in India means juggling a long list of legal and regulatory duties. As your business grows, those compliance tasks eat up more time, money, and energy. This is exactly where “small company” status helps.
A small company still follows the law, of course. However, it enjoys lighter compliance and several relaxations that bigger companies do not get. So it pays less, files less, and frees up resources for actual growth. In this guide, you will learn the small company definition, the latest criteria, the key exemptions, and the real benefits. Let us start with the basics.
What Is a Small Company in India?
A small company is a special category under the Companies Act, 2013. The idea is simple: reduce the regulatory load on smaller private companies so they can focus on building the business.
Importantly, this status does not depend on your industry or the number of employees. Instead, it rests on just two financial measures: paid-up share capital and annual turnover. So if your company stays within both limits, and it is not on the excluded list, it qualifies as a small company.
Small Company Definition: The Legal View
Section 2(85) of the Companies Act, 2013 defines a small company as a company, other than a public company, that meets both of these conditions:
- Its paid-up share capital does not exceed the prescribed limit, and
- Its turnover for the immediately preceding financial year does not exceed the prescribed limit.
The government sets these prescribed limits through rules, and it has raised them several times to bring more companies into the fold.
Small Company Criteria: Latest Limits (2026)
The limits changed again. From 1 December 2025, the Companies (Specification of Definition Details) Amendment Rules, 2025 raised the thresholds to their statutory maximum. So the current small company criteria are:
| Criteria | Current limit |
|---|---|
| Paid-up share capital | Up to Rs 10 crore |
| Annual turnover (preceding FY) | Up to Rs 100 crore |
Remember, your company must satisfy both limits at the same time. If you cross even one, you lose the status. Also, the turnover test looks at the immediately preceding financial year, not the current one.
For context, here is how the limits have grown over the years:
| Effective from | Paid-up capital | Turnover |
|---|---|---|
| Original (2014) | Up to Rs 50 lakh | Up to Rs 2 crore |
| 1 April 2021 | Up to Rs 2 crore | Up to Rs 20 crore |
| 15 September 2022 | Up to Rs 4 crore | Up to Rs 40 crore |
| 1 December 2025 | Up to Rs 10 crore | Up to Rs 100 crore |
Because of these wider limits, a large share of private companies and startups now qualify as small companies.
Which Companies Cannot Be Small Companies?
Not every company can claim this status, even when it fits the financial limits. So the law excludes the following:
- A public company
- A holding company or a subsidiary company
- A company registered under Section 8 (non-profit)
- A company or body corporate governed by any special Act
If your business is a private limited company, though, you most likely qualify. Planning to set one up? Our private limited company registration service makes it simple.
Small Company Exemptions Under the Companies Act, 2013
Now for the relaxations. Small companies get meaningful exemptions across several sections. Here are the main ones.
1. No Cash Flow Statement (Section 2(40))
A small company does not have to prepare a cash flow statement as part of its financial statements. So the year-end reporting gets lighter.
2. Abridged Annual Return (Section 92)
A small company files a simpler annual return in Form MGT-7A. Moreover, a company secretary can sign it, or a director can sign it when there is no company secretary.
3. Abridged Board’s Report (Section 134)
The Board’s report can follow a shorter, abridged format with fewer mandatory disclosures. As a result, drafting takes far less effort.
4. No Internal Financial Controls Reporting (Section 143)
The auditor of a small company does not have to report on the adequacy of internal financial controls. So the audit stays simpler and cheaper.
5. Only Two Board Meetings (Section 173)
A small company needs to hold just two board meetings in a year, with a gap of at least 90 days between them. Larger companies must hold four.
6. Lesser Penalties (Section 446B)
When a small company defaults on certain provisions, it faces reduced penalties compared with other companies. So small slips cost less.
7. No Mandatory Auditor Rotation (Section 139)
A small company does not have to rotate its auditors after the usual term. Therefore, it can keep the same trusted auditor for longer.
8. CARO and Committees Not Required
The Companies (Auditor’s Report) Order, known as CARO 2020, does not apply to small companies. On top of that, they do not need to form an audit committee, a nomination and remuneration committee, or a stakeholder relationship committee.
Real Benefits of Small Company Status
These exemptions translate into clear, practical gains.
First, you save money. Lighter audits, simpler filings, and lower ROC fees all cut your professional costs. Next, you save time, since fewer meetings and reports free your team for revenue work. Moreover, decision-making speeds up because the governance structure stays lean.
You also gain stability. These relaxations are well established, so you can plan with confidence. In short, small company status lets a growing business scale without drowning in paperwork. For your yearly compliance, our private limited annual filing service keeps you on track without the hassle.
One more point worth knowing. A One Person Company enjoys many of these same relaxations, so if you run solo, an OPC may suit you well.
When Do You Lose Small Company Status?
This status is not permanent. Your company stops being a small company the moment it crosses either limit:
- Paid-up capital goes above Rs 10 crore, or
- Turnover for the preceding financial year goes above Rs 100 crore
Since the test runs every year, a single strong year can move you into the standard category. So track your numbers and plan the transition before it arrives.
What Changes After You Graduate?
Once you cross the limits, several obligations kick in. Knowing them early helps you prepare. In short, you will face:
- A fuller audit, including reporting on internal financial controls, plus CARO applicability
- A mandatory cash flow statement and more detailed disclosures
- Four board meetings a year, with stricter timing rules
- The full annual return in Form MGT-7, not the abridged MGT-7A
- Possible committee formation, and in some cases, a company secretary or a secretarial audit
- Mandatory auditor rotation after the prescribed term
These steps add cost and effort, so smart planning matters. If you are nearing the threshold, our Virtual CFO service can guide the transition smoothly.
Conclusion
Small company status under the Companies Act, 2013, is a real advantage for growing businesses. The definition rests on just two numbers, paid-up capital and turnover, and the latest limits of Rs 10 crore and Rs 100 crore now cover a huge range of private companies.
The payoff is concrete: lower costs, fewer filings, simpler audits, and faster decisions. So if your company qualifies, use the status fully while you can. At the same time, watch your growth, because crossing the limits brings heavier compliance. Plan ahead, stay compliant, and let the savings fuel your next stage.
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Frequently Asked Questions
1. What is a small company under the Companies Act, 2013?
It is a private company whose paid-up capital stays up to Rs 10 crore and whose turnover stays up to Rs 100 crore, and which is not on the excluded list.
2. What are the latest small company limits in 2026?
From 1 December 2025, the limits are paid-up capital up to Rs 10 crore and turnover up to Rs 100 crore. A company must meet both.
3. Can a private limited company be a small company?
Yes. Most private limited companies qualify, unless they are a holding, subsidiary, Section 8, or specially governed company.
4. How many board meetings must a small company hold?
Only two in a financial year, with a minimum gap of 90 days between them.
5. Which annual return form does a small company file?
A small company files the abridged annual return in Form MGT-7A instead of Form MGT-7.
6. Do small companies need a cash flow statement?
No. A small company does not need to prepare a cash flow statement with its financial statements.
