Small Company Thresholds explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Two financial limits, both of which must be met — and four categories that are excluded however small they are.
The definition as the FAQ states it
A Small Company, other than public company, means a company where the: (a) Paid-up share capital of the company does not exceed INR 50 Lakhs or such higher amount as may be prescribed which shall not be more than ten crore rupees; and (b) Turnover of which as per profit and loss account for the immediately preceding financial year does not exceed two crores rupees or such higher amount as may be prescribed which shall not be more than hundred crore rupees.
Note: No higher amount has been prescribed as yet.
Further, holding company, subsidiary company, company registered under Section 8 or a company or body corporate governed by any special act will not be considered as a small company.
The 2019 note — no higher amount has been prescribed as yet — is the key to understanding this definition, because the section was drafted in two layers.
The operative figures sit in the rules and can be changed by notification. The outer ceilings sit in the section itself: not more than ten crore rupees of paid-up capital and not more than hundred crore rupees of turnover. Parliament fixed the maximum the executive may prescribe; the executive sets the actual level within it.
That design let the thresholds be raised without amending the Act, and they were — substantially. The prescribed limits were increased to four crore rupees of paid-up capital and forty crore rupees of turnover, which brought a large number of companies into the category and out of several compliance obligations at once.
Note the conjunction in the definition: paid-up capital and turnover. Both limits must be satisfied. A company with modest capital and large turnover is not a small company, and neither is the reverse — unlike the audit and CSR tests elsewhere in the framework, which use alternatives.
The four exclusions are absolute and have nothing to do with size. A holding company or subsidiary company is excluded because it is part of a larger structure whose accounts matter to others. A section 8 company is excluded because of its purpose. A body governed by a special Act is regulated elsewhere. And the definition opens by excluding public companies altogether.
Confirm the current prescribed figures before applying them; this is one of the most frequently revised definitions in the Act.
The structure of the small company thresholds test
| Element | Position |
|---|---|
| Company type | Must be other than a public company |
| Paid-up share capital | Below the prescribed limit; statutory ceiling ten crore rupees |
| Turnover | Below the prescribed limit, per the profit and loss account for the immediately preceding financial year; statutory ceiling hundred crore rupees |
| Conjunction | Both must be satisfied |
| Excluded regardless of size | Holding company; subsidiary company; section 8 company; body governed by a special Act |
The subsidiary exclusion in practice
This is the exclusion that most often surprises. A genuinely small operating company that happens to be a subsidiary — even of another small company — cannot be a small company. The status looks through to the group, not to the entity.
The consequence is that a group restructuring which makes one company a subsidiary of another removes small company status from it, with all the compliance relief that carries.
What the status is worth
- Exemption from preparing a cash flow statement, alongside OPCs and dormant companies.
- Relief in board meeting frequency and certain procedural requirements.
- Reduced filing and reporting obligations across several rules.
- Lower penalties under the small-company provisions of the Act.
Because the relief is broad, the small company thresholds should be tested each year against the preceding year's figures rather than assumed to continue.
Common mistakes
- Applying the 2019 small company thresholds instead of the current prescribed figures.
- Treating the two limits as alternatives rather than cumulative.
- Claiming the status for a subsidiary or holding company.
- Testing turnover on the current year rather than the immediately preceding financial year.