MSME Classification Table – Investment and Turnover Thresholds (India)
What is MSME?
MSME stands for Micro, Small and Medium Enterprises. These are businesses classified under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 based on their investment in plant and machinery/equipment and their annual turnover.
MSMEs play a critical role in India’s economy, contributing significantly to employment, GDP, and exports. The Government of India has revised MSME classification thresholds multiple times to better reflect ground realities and provide targeted support to more enterprises.
MSME Classification – Current Thresholds (Effective 1st April 2025)
Pursuant to Notification S.O. 1364(E) dated 21st March 2025, the Ministry of MSME revised the classification criteria with effect from 1st April 2025.
Both criteria – investment in plant and machinery/equipment AND annual turnover – must be within the prescribed limits simultaneously. If either criterion is exceeded, the enterprise moves to the next higher category.
| Category | Investment in Plant & Machinery / Equipment | Annual Turnover |
|---|---|---|
| Micro Enterprise | Does not exceed ₹2.5 Crore | Does not exceed ₹10 Crore |
| Small Enterprise | Does not exceed ₹25 Crore | Does not exceed ₹100 Crore |
| Medium Enterprise | Does not exceed ₹125 Crore | Does not exceed ₹500 Crore |
Evolution of MSME Classification Over the Years
1. Original Classification – MSMED Act, 2006 (Before July 2020)
Under the original framework, MSMEs were classified separately for manufacturing and service enterprises, based only on investment (not turnover):
Manufacturing Enterprises:
| Category | Investment in Plant & Machinery |
|---|---|
| Micro | Up to ₹25 Lakh |
| Small | ₹25 Lakh to ₹5 Crore |
| Medium | ₹5 Crore to ₹10 Crore |
Service Enterprises:
| Category | Investment in Equipment |
|---|---|
| Micro | Up to ₹10 Lakh |
| Small | ₹10 Lakh to ₹2 Crore |
| Medium | ₹2 Crore to ₹5 Crore |
2. Revised Classification – Effective 1st July 2020
Vide Gazette Notification S.O. 2119(E) dated 26th June 2020, the Government introduced a unified classification applicable to both manufacturing and service enterprises, adding turnover as a second criterion:
| Category | Investment in Plant & Machinery / Equipment | Annual Turnover |
|---|---|---|
| Micro Enterprise | Does not exceed ₹1 Crore | Does not exceed ₹5 Crore |
| Small Enterprise | Does not exceed ₹10 Crore | Does not exceed ₹50 Crore |
| Medium Enterprise | Does not exceed ₹50 Crore | Does not exceed ₹250 Crore |
Key changes introduced:
- Unified definition – no separate classification for manufacturing and services
- Turnover added as a second criterion alongside investment
- Exports excluded from turnover calculation for MSME classification purposes
3. Latest Classification – Effective 1st April 2025
Announced in Union Budget 2025 and notified via S.O. 1364(E) dated 21st March 2025:
| Category | Investment (New) | Investment (Old) | Turnover (New) | Turnover (Old) |
|---|---|---|---|---|
| Micro | ₹2.5 Crore | ₹1 Crore | ₹10 Crore | ₹5 Crore |
| Small | ₹25 Crore | ₹10 Crore | ₹100 Crore | ₹50 Crore |
| Medium | ₹125 Crore | ₹50 Crore | ₹500 Crore | ₹250 Crore |
The investment limits were increased by 2.5 times and the turnover limits were doubled compared to the 2020 thresholds.
Key Rules and Conditions
Composite Criteria (Both Must Be Met)
An enterprise must satisfy both investment and turnover criteria to qualify for a particular category. If either limit is breached, the enterprise moves to the next higher category. However, an enterprise will not be reclassified to a lower category unless it goes below both limits.
GSTIN-PAN Aggregation
All units registered under the same PAN (regardless of GSTIN) are treated as a single enterprise for MSME classification. Investment and turnover of all such units are aggregated.
Exports Excluded from Turnover
Export turnover is not counted when calculating annual turnover for MSME classification purposes. This encourages MSMEs to expand their export activities without losing MSME status.
Investment Valuation (WDV Basis)
The investment in plant and machinery or equipment means the Written Down Value (WDV) as at the end of the financial year as per the Income Tax Act – not the cost of acquisition or original price.
Grace Period on Reclassification
An enterprise that crosses the ceiling limits will continue in its present category till the closure of the financial year and will be given the benefit of the changed status only from 1st April of the following financial year.
Non-Tax Benefits After Downward Reclassification
An enterprise that is downgraded will continue to avail non-tax benefits of its previous category for a period of 3 years from the date of reclassification (notification dated 19th October 2022).
MSME Registration – Udyam Portal
From 1st July 2020, MSME registration is done on the Udyam Registration Portal:
Website: https://udyamregistration.gov.in
The Udyam Registration Number (URN) issued is of the format: UDYAM-XX-00-0000000
Documents required for Udyam Registration:
- Aadhaar Card of the proprietor/partner/director
- PAN Card
- GSTIN (if applicable)
- Bank account details
- Nature of business activity
- NIC code for the main activity
Benefits of MSME Registration
| Benefit | Description |
|---|---|
| Collateral-free loans | Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) |
| Priority Sector Lending | Banks required to lend a portion to MSME sector |
| Subsidies | On patent registration, ISO certification, and technology upgradation |
| Delayed Payment Protection | Buyers must pay MSMEs within 45 days; interest @3× bank rate for delay |
| Government Procurement | 25% of government procurement reserved for MSMEs |
| Tax benefits | Various state-level and central tax exemptions |
| Electricity concessions | Lower electricity tariff in many states |
MSME and MCA Filings – Connection
Company Secretaries and professionals should note the connection between MSME status and MCA compliance:
- Form MSME-1: Half-yearly return for outstanding dues to MSME suppliers (filed by companies and LLPs with dues exceeding 45 days to MSME suppliers)
- AOC-4 Disclosures: Companies must disclose dues to MSME suppliers in their financial statements
- Directors’ Report: Must include details on MSME payments as required under the MSMED Act
With the revised April 2025 thresholds, many companies’ existing vendors may newly qualify as MSMEs. Companies are advised to:
- Collect fresh Udyam Registration confirmations from vendors
- Update their vendor master to flag MSME status
- Review payment terms in contracts to ensure 45-day compliance
- Update MSME-1 filings accordingly