Micro, Small or Medium? MSME Limits Explained With Examples
Your MSME category depends on two numbers together: investment in plant, machinery or equipment, and yearly turnover. From 1 April 2025 the limits are Rs 2.5 crore and Rs 10 crore for micro, Rs 25 crore and Rs 100 crore for small, and Rs 125 crore and Rs 500 crore for medium. You must stay within both.
- The current limits come from notification S.O. 1364(E) dated 21 March 2025, in force from 1 April 2025.
- Both tests apply. Cross either limit and you move to the next category.
- Export turnover is left out when turnover is measured for classification.
- Investment excludes land, building, furniture and fittings.
- After you move up a category, non-tax benefits of the old category continue for three years.
In this guide
The limits in force
| Category | Investment in plant, machinery or equipment | Turnover | Earlier limits (1 July 2020 to 31 March 2025) |
|---|---|---|---|
| Micro | Up to Rs 2.5 crore | Up to Rs 10 crore | Rs 1 crore and Rs 5 crore |
| Small | Up to Rs 25 crore | Up to Rs 100 crore | Rs 10 crore and Rs 50 crore |
| Medium | Up to Rs 125 crore | Up to Rs 500 crore | Rs 50 crore and Rs 250 crore |
The same limits apply to manufacturers and service providers. The old split between the two went away in 2020. Many websites still show the 2020 figures, so check the date on anything you read.
Why two tests, and what "both" means
Does a business with tiny machines and huge sales count as micro? No. The law uses a composite test so that a business is judged by its size on both counts. You are in a category only if your investment and your turnover are both within its limits. If either one is higher, you are placed in the higher category.
The number of employees does not decide your category. The portal asks for it, but the test is investment and turnover.
How investment is computed
- It covers plant, machinery and equipment: the tangible assets you use to make goods or deliver services.
- Land, building, furniture and fittings are excluded.
- For a business that has filed income tax returns, the figure is linked to the return of the previous year. In practice this is the written down value, meaning cost less depreciation claimed.
- For a new business with no return yet, you declare the purchase invoice value, new or second-hand, without GST. This relaxation ends after 31 March of the year in which you file your first return.
How turnover is computed
- Turnover is taken from your income tax and GST data, linked through PAN and GSTIN.
- Exports of goods or services are excluded for classification.
- All units and all GSTINs under the same PAN are added together. You cannot split a business into branches to stay micro.
Three worked examples
Example 1: an online seller of kitchenware
Investment in equipment (computers, packing machines, racks excluded): Rs 40 lakh. Turnover: Rs 3.2 crore, all in India. Both are within Rs 2.5 crore and Rs 10 crore. Category: micro.
Example 2: a garment manufacturer
Investment: Rs 1.8 crore. Turnover: Rs 14 crore. Investment fits micro, but turnover is above Rs 10 crore. One test failed, so the category is small. This is the case people get wrong most often.
Example 3: an auto parts exporter
Investment: Rs 30 crore. Total turnover: Rs 620 crore, of which exports are Rs 180 crore. Counted turnover is Rs 620 crore less Rs 180 crore, which is Rs 440 crore. That is within Rs 500 crore. Investment of Rs 30 crore is above the small limit of Rs 25 crore and within Rs 125 crore. Category: medium. Without the export exclusion this business would not be an MSME at all.
A business that crosses Rs 125 crore of investment or Rs 500 crore of counted turnover is outside the MSME definition.
What happens when your numbers change
You do not re-register. The portal reclassifies you from the income tax and GST data of the previous year, and tells you about the change.
| Change | What happens |
|---|---|
| You grow into a higher category | You keep all non-tax benefits of the earlier category for three years from the date of the upward change, under the amendment of 18 October 2022 |
| You shrink into a lower category | You stay in the present category until the financial year closes. The lower category applies from 1 April of the next year |
Non-tax benefits include the public procurement policy and the delayed payment rules. The three year window exists so that a growing business is not punished for growing.
Why the category matters to you
The delayed payment protection in the MSMED Act and the tender relaxations are for micro and small enterprises, not medium ones. Some bank schemes have separate terms for micro units. So the line between small and medium is the one with real money on it. If a buyer owes you Rs 20 lakh and you have slipped into medium, the 45 day rule no longer protects that invoice.
The mistake people usually make
They look at only one number. A trader with almost no machinery assumes he is micro, ignoring a turnover of Rs 15 crore. Or an owner adds the factory building and land to investment and declares a small enterprise when the machines alone would make it micro. Check both figures, on the right base, before you fill the form. The other common slip is quoting the pre-2025 limits to a bank or buyer.
What to do next: take last year's income tax return, note the plant and machinery figure and the turnover, subtract exports, and place yourself in the table. Then follow the Udyam registration steps.
Sources
How AprilTax can help
If you are unsure which figures to declare, an AprilTax Tax Expert can file your Udyam registration from one online form. Registration on the government portal itself is free, and the fee for the service is shared on a call. Start at Udyam registration with AprilTax.
Frequently asked questions
What is the MSME classification limit now?
Do I have to meet both the investment and turnover limits?
Are exports included in MSME turnover?
Is land and building counted in MSME investment?
Does the number of employees decide the MSME category?
What happens to my benefits if I move from small to medium?
Do I need to register again when my category changes?
Are the limits different for manufacturing and services?
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