The current screen is ₹10 crore and ₹100 crore, together
For a current FY 2026–27 small-company status working, use paid-up share capital not exceeding ₹10 crore and turnover as per the profit-and-loss account of the immediately preceding financial year not exceeding ₹100 crore, together with the exclusions in section 2(85). The Companies (Specification of definition details) Amendment Rules, 2025 dated 1 December 2025 revised Rule 2(1)(t). ICSI's December 2026 examination supplement reproduces the revised test. Do not continue a current eligibility working using an older threshold template. Both numerical limbs and the legal-category screen must be satisfied. ICSI December 2026 Company Law supplement: amended Rule 2(1)(t) and section 2(85).
The amount tests do not override the exclusions
A public company is outside the definition. A holding company or subsidiary company, a section 8 company, or a company or body corporate governed by a special Act is also excluded by the proviso. An ordinary private company that passes both amount tests can still fail because it is a subsidiary. Preserve the actual group relationship and company-class evidence; a low capital figure is not a substitute for that review. ICSI 2026 supplement: section 2(85) and amended Rule 2(1)(t).
Match the turnover to the correct financial year
The statutory definition refers to the profit-and-loss account for the immediately preceding financial year. For a FY 2026–27 working, identify the relevant FY 2025–26 turnover rather than automatically substituting FY 2026–27 sales. Record the paid-up capital and the date relevant to the compliance assessment. Different compliance provisions can require their own timing analysis; do not treat this article as a ruling on every mid-year change or transition. For CARO, ICAI's guidance assesses the company's status at the balance-sheet date. Current small-company definition; ICAI CARO guidance, paragraph 12.
Translate the status conclusion into a CARO conclusion
CARO 2020 paragraph 1(2)(iv) excludes a small company as defined in section 2(85). Apply that category exemption after establishing status using the current prescribed amounts and the exclusions. Do not apply the older monetary amounts reproduced in historical commentary on the definition. CARO also has other exemption categories and a separate private-company exemption; failure of the small-company test does not alone prove that CARO applies. CARO relief concerns the additional reporting order and is not a general exemption from statutory audit. CARO 2020 and ICAI guidance on exempt entities.
Cash-flow relief does not remove the notes
The proviso to section 2(40) permits a small company's financial statements not to include a cash-flow statement. The definition also includes explanatory notes. Section 129 requires the applicable accounting standards and Schedule III form, subject to its scope and exceptions. Therefore, document any cash-flow presentation relief separately from the continuing notes and financial-statement requirements. Confirm the applicable accounting framework before taking the relief; the small-company label does not justify discarding a disclosure required under that framework. Companies Act, sections 2(40) and 129.
Keep other classification systems and filing decisions separate
Section 2(85) small-company status is not, merely by name, the same as an MSME category or an accounting-standard small and medium-sized company classification. Nor does the threshold amendment alone answer every form-selection, certification, dematerialisation or portal-validation question. Complete each applicable provision's assessment with the correct period and effective date. This article provides a current eligibility and reporting working, rather than promising universal filing relief. Scope of the revised definition in the ICSI supplement.
Applicable primary references
MCA year-end review, 1 January 2026: G.S.R. 880(E), revised small-company thresholds.
ICSI December 2026 Company Law supplement: amended Rule 2(1)(t) and section 2(85) ICAI Guidance Note on CARO 2020: paragraph 12 and text of the Order Companies Act, 2013: sections 2(40) and 129
Six worked illustrations
All facts and amounts below are fictional. Assumptions describe the model, not additional statutory rules.
Illustrative example 1: Equality at both limits
Assume an ordinary private company with no statutory exclusion and correctly selected period data. Paid-up capital is exactly ₹10 crore and preceding-year P&L turnover exactly ₹100 crore. Both amount tests pass because neither amount exceeds its limit. Headroom is nil in both tests; the company must still verify category, relationship and relevant-date facts before claiming status or consequential relief.
Illustrative example 2: A company within the revised limits
Assume the same eligibility conditions, paid-up capital of ₹8 crore and preceding-year turnover of ₹75 crore. Capital headroom is ₹2 crore and turnover headroom ₹25 crore. Both revised amount tests pass. An older spreadsheet flag is not sufficient evidence of ineligibility when it has not been updated to the amended Rule 2(1)(t).
Illustrative example 3: Capital exceeds the boundary by ₹1,000
Paid-up capital at the relevant assessment date is ₹10,00,01,000 and preceding-year turnover ₹90 crore. Capital exceeds ₹10,00,00,000 by ₹1,000, so the capital limb fails even though turnover is ₹10 crore below its limit. The test does not permit rounding paid-up capital down to ₹10 crore to create eligibility.
Illustrative example 4: Preceding-year turnover exceeds the limit
Assume paid-up capital of ₹7 crore, preceding-year turnover of ₹100.02 crore and current-year turnover of ₹80 crore. The relevant turnover exceeds ₹100 crore by ₹0.02 crore, or ₹2 lakh. The current year's smaller ₹80 crore figure does not replace the preceding-year figure for this definition's turnover limb. Small-company status fails on these assumed facts.
Illustrative example 5: Numerical compliance with a subsidiary exclusion
A private subsidiary has ₹3 crore paid-up capital and ₹20 crore preceding-year turnover. The numerical headroom is ₹7 crore and ₹80 crore, respectively. It nevertheless fails the section 2(85) small-company definition because it is a subsidiary. Assess CARO's other exemption categories independently rather than inventing a small-company exemption for it.
Illustrative example 6: Keep the next year's turnover trail
Assume properly determined FY 2025–26 P&L turnover comprises ₹90 crore and ₹6 crore of relevant turnover components, totalling ₹96 crore. With ₹9.5 crore paid-up capital and no exclusions, the model FY 2026–27 amount working has capital headroom of ₹0.5 crore and turnover headroom of ₹4 crore. If FY 2026–27 ultimately closes with relevant turnover of ₹110 crore, that becomes the preceding-year turnover for a FY 2027–28 working and exceeds ₹100 crore by ₹10 crore. Reassess status; do not permanently label the company small based on the earlier year.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Identify the compliance and assessment date | Reporting year, balance-sheet date and purpose of the status conclusion. |
| 2 | Use the amended Rule 2(1)(t) | Current ₹10 crore and ₹100 crore limits with the 2025 amendment reference. |
| 3 | Confirm the company class | Private/public and any special-Act or section 8 status evidence. |
| 4 | Check holding and subsidiary relationships | Group chart, control facts and relevant effective dates. |
| 5 | Verify paid-up share capital | Capital register and statutory records at the relevant date. |
| 6 | Select preceding-year P&L turnover | Correct financial year, P&L and turnover reconciliation. |
| 7 | Test both amounts without eligibility rounding | Exact amounts, inclusive boundaries and exception review. |
| 8 | Conclude CARO applicability separately | Small-company category and any other independently applicable exemption. |
| 9 | Review cash-flow presentation and notes | Applicable framework, section 2(40), section 129 and disclosure checklist. |
| 10 | Approve and retain the working | Evidence-linked status conclusion and a next-year reassessment reminder. |
Sixteen practitioner FAQs
1. What are the revised prescribed amounts?
Paid-up capital must not exceed ₹10 crore and the relevant preceding-year P&L turnover must not exceed ₹100 crore.
2. Is satisfying only one amount test enough?
No. Both amount tests and the legal-category conditions must be satisfied.
3. Does exactly ₹10 crore paid-up capital pass that limb?
Yes, equality is within the not-exceeding boundary, subject to the other conditions.
4. Does exactly ₹100 crore preceding-year turnover pass?
Yes for that numerical limb; complete the remaining eligibility checks.
5. Which rule changed the amounts?
The Companies (Specification of definition details) Amendment Rules, 2025 dated 1 December 2025 amended Rule 2(1)(t).
6. Can a public company qualify under section 2(85)?
No. The definition concerns a company other than a public company.
7. Can a small private subsidiary qualify?
The subsidiary exclusion applies even where the numerical amounts are below both limits.
8. Are holding companies excluded too?
Yes. The proviso excludes a holding company as well as a subsidiary company.
9. What about section 8 and special-Act entities?
The stated proviso exclusions must be applied; the threshold amounts do not override them.
10. Which turnover year matters in a FY 2026–27 working?
The definition refers to the immediately preceding financial year's P&L, meaning FY 2025–26 for that working.
11. Can a small excess be rounded away to claim eligibility?
Do not turn an above-limit exact amount into a passing amount by presentation rounding.
12. Does passing the small-company test matter for CARO?
CARO 2020 paragraph 1(2)(iv) excludes a small company as defined in section 2(85).
13. Does failing the definition automatically make CARO applicable?
No. Assess the order's other exemption categories and the actual company facts independently.
14. Does CARO exemption abolish statutory audit?
No. Exemption from the additional reporting order is not a general statutory-audit exemption.
15. Can a qualifying small company discard all financial-statement notes?
No. Cash-flow presentation relief is separate from applicable explanatory notes, standards and Schedule III requirements.
16. Is the status permanent or identical to an MSME classification?
No. Reassess the relevant facts and period, and apply each separate classification system on its own terms.
Conclusion
Apply the revised small-company limits with exclusions and preceding-year turnover, then assess CARO, cash-flow presentation and continuing note requirements.