Whether your business counts as micro, small or medium decides which government schemes, lending programmes and legal protections you can use. On 21 March 2025 the Ministry of MSME issued Notification S.O. 1364(E), amending the 2020 classification notification (S.O. 2119(E)). From 1 April 2025 the investment limits rose by 2.5 times and the turnover limits doubled. The new numbers are simple. How your investment and turnover are counted, and what happens when you cross a limit, needs more care. This article covers both, using the wording of the official notifications.
In this guide
1. The Revised Limits (Effective 1 April 2025)
An enterprise is classified on two tests together: investment in plant and machinery or equipment, and annual turnover. The same limits apply to manufacturing and service enterprises. • Micro: investment up to ₹2.5 Crore and turnover up to ₹10 Crore (earlier ₹1 Crore and ₹5 Crore) • Small: investment up to ₹25 Crore and turnover up to ₹100 Crore (earlier ₹10 Crore and ₹50 Crore) • Medium: investment up to ₹125 Crore and turnover up to ₹500 Crore (earlier ₹50 Crore and ₹250 Crore) Because the test is composite, you must stay within both limits to be in a category. RBI has told banks to follow the classification recorded in the Udyam Registration Certificate when they classify MSME loans under priority sector lending. So what your Udyam certificate shows is what matters in practice.
- A unit with ₹2 Crore of plant and machinery but ₹14 Crore of turnover is small, not micro, because turnover exceeds the micro limit.
- A unit with ₹30 Crore of plant and machinery and ₹60 Crore of turnover is medium, because investment exceeds the small limit.
2. How Investment in Plant & Machinery Is Calculated
Investment is not what you originally paid for your machines. The notification and the Ministry's clarification set out the rules:
- It is linked to your Income Tax Return for the previous years. The Ministry's Office Memorandum of 6 August 2020 clarifies that the value means the Written Down Value (WDV) at the end of the financial year, as defined under income-tax law, not the cost of acquisition.
- "Plant and machinery or equipment" has the meaning used in the Income Tax Rules and includes all tangible assets except land and building and furniture and fittings.
- The cost of items specified in Explanation I to section 7(1) of the MSMED Act is excluded. These are pollution control, research and development and industrial safety devices, plus any other items notified.
- A new enterprise with no ITR yet uses the promoter's self-declaration and takes purchase (invoice) value excluding GST, whether the equipment was bought new or second-hand. This relaxation ends after 31 March of the financial year in which the enterprise files its first ITR.
3. How Turnover Is Calculated
Turnover for classification is also defined narrowly, and it can be very different from your total sales.
- Exports of goods, services or both are excluded. An exporter with large overseas sales may still be micro or small based on domestic turnover.
- Turnover and export turnover figures are linked to the Income-tax Act or CGST Act records and to your GSTIN. PAN and GSTIN have been mandatory for this since 1 April 2021.
- All GSTINs registered against the same PAN count as one enterprise. Turnover and investment across all of them are added together, so multi-state units cannot be split to stay under a limit.
4. What Happens When You Cross a Limit (Reclassification)
Every Udyam-registered enterprise has to update its details on the portal, including previous-year ITR and GST data. The classification is then updated from that information and from government sources, and the enterprise is told when its category changes. The rules for moving between categories are not symmetrical:
- Moving up: cross the limit for your category on either test (investment or turnover) and you move to the next higher category.
- Moving down: you drop to a lower category only when you fall below your current category's limits on both tests.
- Benefit protection when moving up: under S.O. 4926(E) dated 18 October 2022, an enterprise that moves up keeps all non-tax benefits of its earlier category for three years from the date of the upward change.
- Moving down (reverse graduation): the enterprise stays in its present category until the end of that financial year. It gets the benefit of the new, lower category only from 1 April of the next financial year.
5. What Changed in Practice After the 2025 Revision
Raising the limits pulled many businesses into a lower category, or into the MSME fold for the first time. That matters because several important benefits are only for micro and small enterprises (MSEs), not medium ones: • CGTMSE credit guarantees cover micro and small enterprises. • The delayed-payment provisions of the MSMED Act (payment within the agreed period, capped at 45 days, with compound interest at three times the RBI bank rate on delays) protect micro and small suppliers. Claims go through the MSME ODR portal and State MSE Facilitation Councils. • The Public Procurement Policy for MSEs, with its 25% procurement target, covers micro and small enterprises. An enterprise that was medium under the 2020 limits may now be small, and a small one may now be micro. Your category is set by the figures and updates on your Udyam record. Check it rather than assume it changed automatically.
- Log in to the Udyam portal and check the classification shown for the current year.
- Make sure the investment and turnover on the portal match your latest ITR and GST returns.
- If your category has changed, update your lenders and key buyers, because it can affect priority sector classification of your loans and your rights on delayed payments.
Key takeaways
- From 1 April 2025 (S.O. 1364(E)): micro is up to ₹2.5 Crore investment and ₹10 Crore turnover; small is ₹25 Crore / ₹100 Crore; medium is ₹125 Crore / ₹500 Crore.
- Both tests must be met. Crossing either limit moves you up; you move down only when you are under both limits of your current category.
- Investment means written down value from your ITR, excluding land, building, furniture and fittings. Export turnover is excluded from turnover.
- After moving up, you keep the non-tax benefits of your earlier category for three years. After moving down, the new category applies from the next 1 April.
- Keep your Udyam record updated with ITR and GST data every year. Banks rely on the category shown on your certificate.
Frequently asked questions
What are the new MSME limits from 1 April 2025?
Micro: investment up to ₹2.5 Crore and turnover up to ₹10 Crore. Small: investment up to ₹25 Crore and turnover up to ₹100 Crore. Medium: investment up to ₹125 Crore and turnover up to ₹500 Crore. These were notified in S.O. 1364(E) dated 21 March 2025.
Is export turnover counted for MSME classification?
No. Exports of goods, services or both are excluded when turnover is calculated for classification. Turnover and export figures are linked to your income-tax and GST records.
Is investment in plant and machinery taken at cost or written down value?
At written down value. The Ministry of MSME clarified in its Office Memorandum of 6 August 2020 that the value means the WDV at the end of the financial year as defined under income-tax law, not the original cost. Land, building, furniture and fittings are excluded.
Will I lose my MSME benefits if my turnover grows past the limit?
You move to the next higher category, but under the October 2022 amendment you keep the non-tax benefits of your earlier category for three years from the date of the upward change. Tax-related benefits are not covered by this protection, so check each one separately.
Do I need to register again because the limits changed?
No. You keep your existing Udyam registration. Classification is updated from the information you update on the portal and from government sources such as ITR and GST returns. There is no fee for registering or updating on the official portal.
Are traders classified as MSMEs under these limits?
Retail and wholesale traders can register on Udyam, but under the Ministry's Office Memorandum of 2 July 2021 this is only for priority sector lending. They do not get the other MSME benefits, such as the Public Procurement Policy for MSEs.
Official sources
- Notification S.O. 1364(E) dated 21 March 2025 (with S.O. 2119(E) dated 26 June 2020), Ministry of MSME(opens in a new tab)
- Ministry of MSME Office Memorandum dated 6 August 2020 (valuation of plant and machinery)(opens in a new tab)
- PIB: Non-tax benefits for three years after upward reclassification (S.O. 4926(E), 18 October 2022)(opens in a new tab)
- RBI FAQs on Micro, Small and Medium Enterprises (updated 29 July 2025)(opens in a new tab)
- Udyam Registration Portal, Ministry of MSME(opens in a new tab)
General information only, not advice for your specific situation. Scheme rules and bank policies change; check the official source or talk to us before acting on it. Lending and subsidy decisions are made by banks, NBFCs and government agencies.