MSME classification: current investment and turnover limits

Under the MSME classification rules effective from 1 April 2025, an Indian enterprise is classified as micro, small or medium using two numbers: how much it has invested in plant and machinery or equipment, and its annual turnover.

Both figures must stay within the ceiling for a category, and if either one crosses it, the enterprise moves to the next category up.

The current limits lifted both ceilings sharply, so some businesses that were small or medium under the old figures may now fall into a lower band.

Export turnover is left out of the turnover count, which matters if you earn a large share of your income from overseas clients.

These numbers come from notification S.O. 1364(E), issued by the Ministry of MSME on 21 March 2025 under Section 7 of the MSMED Act 2006. They replaced the 2020 limits, which had themselves replaced the original 2006 thresholds, so figures on older pages can be one or two revisions out of date.

The current MSME classification limits apply the same way to manufacturing and service enterprises, with no separate table for each.

An enterprise qualifies for a category only when its investment and its turnover are both at or below that category's ceiling.

Take an IT services firm with ₹3 crore invested in computers, servers and office equipment and ₹9 crore in annual turnover.

Its turnover sits inside the micro ceiling, but its investment of ₹3 crore is above the ₹2.5 crore micro limit, so it is classified as a small enterprise. The less favourable of the two positions decides the category.

The composite investment and turnover test is a two-part rule: you check your investment figure against a category and your turnover figure against the same category, and you are placed in whichever category holds both.

You cannot average the two numbers or pick the kinder one.

• Both conditions must be met - to be micro, you need investment at or below ₹2.5 crore and turnover at or below ₹10 crore. Miss either, and micro is off the table.
• The breach decides the move - if a single figure crosses its ceiling, the enterprise is reclassified into the next band where both numbers fit, even if the other figure is still well inside the lower band.
• One classification covers the whole enterprise - the investment and turnover of all units registered under the same PAN are added together before the test is applied, so splitting a business across units under one PAN does not keep it in a lower category.

Consider a domestic auto-parts manufacturer with ₹20 crore invested in plant and machinery and ₹130 crore in turnover, all of it from sales within India.

The investment is within the small ceiling, but the turnover has crossed the ₹100 crore small limit, so the firm becomes a medium enterprise under the composite test.

Getting the MSME limits right depends on measuring the two numbers the way the notification defines them, not on what you paid for assets or on your gross sales.

Investment is read from the written-down value of plant and machinery or equipment as recorded in the previous year's ITR, so it falls over time as assets depreciate rather than staying at purchase price.

Turnover is pulled automatically from the figures linked to your PAN and GSTIN.

The export carve-out is the one most owners miss: if you sell software or services overseas, that income does not count toward the ₹10 crore, ₹100 crore or ₹500 crore turnover ceilings, so a heavy exporter can stay in a lower category than its gross sales would suggest.

This exclusion comes from the 2020 framework, which the 2025 notification amends only by raising the limits.

MSME classification has changed twice since 2006, which is why old figures linger online. The original MSMED Act 2006 judged enterprises on investment alone and split the limits between manufacturing and services.

The 2020 notification, S.O. 2119(E), introduced the composite turnover-and-investment test and a single set of limits for both. The 2025 revision kept that structure and only raised the ceilings.

The 2025 revised MSME classification roughly doubled the turnover ceilings and raised investment limits about two and a half times.

For a service business the 2006 row looked different again, with much lower equipment limits, but those splits ended in 2020 and no longer apply.

When your enterprise crosses an MSME limit on either investment or turnover, the reclassification is not instant, and the direction of the move changes how it is treated.

Growth that pushes you up a band is handled gently, and a fall back down is applied from the next financial year.

• Moving up a category - where you graduate upward, you keep the non-tax benefits of MSME registration for your earlier, smaller category for three years from the date of the upward change, so support does not stop the moment you grow. This window was set by the October 2022 amendment to the 2020 notification.
• Moving down a category - if your figures fall below a ceiling, the lower category generally applies from the start of the next financial year rather than mid-year, based on the full year's ITR and GST data.
• The data drives it - because Udyam reads your PAN-linked ITR and GST returns, a change in your numbers is generally picked up from your tax filings without a separate application.

Your MSME category is printed on your Udyam Registration Certificate, which also shows a year-wise classification so you can see how your band has changed over time.

Because the underlying data refreshes from your tax filings, the certificate is the record to check for where you stand today.

If you have not registered yet, the same portal handles the process, covered in the guide on Udyam registration. Once registered, the certificate itself and what each field means are explained in the walkthrough on the MSME certificate.