New MSME Classification Limits 2026: Investment & Turnover Thresholds Explained
A comprehensive guide to the updated MSME classification thresholds under the MSMED Act, how composite criteria work, and how export turnover exemptions apply.
- •Revised classification limits effective 1 April 2025 per Gazette Notification S.O. 1364(E) dated 21 March 2025.
- •Micro: Investment in P&M ≤ ₹2.5 Crore AND Turnover ≤ ₹10 Crore.
- •Small: Investment in P&M ≤ ₹25 Crore AND Turnover ≤ ₹100 Crore.
- •Medium: Investment in P&M ≤ ₹125 Crore AND Turnover ≤ ₹500 Crore.
- •Both Investment and Turnover criteria are composite and must be met simultaneously; exceeding either moves the unit to the next category.
- •Export turnover of goods and services is 100% EXCLUDED when calculating the turnover ceiling.
1. Updated MSME Classification Thresholds
Through **Gazette Notification S.O. 1364(E) dated 21 March 2025**, the Ministry of Micro, Small and Medium Enterprises officially revised the composite investment and turnover thresholds effective **1 April 2025**.
The unified definition applies equally to both **Manufacturing and Service** enterprises:
| Classification | Investment in Plant & Machinery / Equipment | Annual Net Turnover |
|---|---|---|
| : |
| : |
|---|
| : |
|---|
| Micro Enterprise | Up to ₹2.50 Crore | Up to ₹10.00 Crore |
| Small Enterprise | Up to ₹25.00 Crore | Up to ₹100.00 Crore |
| Medium Enterprise | Up to ₹125.00 Crore | Up to ₹500.00 Crore |
*(For historical reference, prior limits were: Micro ₹1Cr/₹5Cr; Small ₹10Cr/₹50Cr; Medium ₹50Cr/₹250Cr).*
2. How the Composite Criteria Mechanism Works
- **Both Criteria Are Mandatory:** An enterprise must satisfy both investment and turnover ceilings to remain in a category. If an enterprise exceeds the ceiling limit specified for its present category in either of the two criteria, it ceases to hold that status and is graduated to the next higher category.
- **Downward Reclassification:** An enterprise will be reclassified downwards only if both its investment and turnover go below the specified limits for that lower category.
3. Important Exemption: Export Turnover is Excluded
Under Section 7 of the MSMED Act: > **Calculation of turnover:** Turnover of exports of goods or services or both shall be excluded while calculating the turnover of any enterprise for the purposes of MSME classification.
**Practical Example:** If an enterprise has a total turnover of ₹120 Crore, of which ₹40 Crore is from domestic sales and ₹80 Crore is from export sales: - **Net Qualifying Turnover for MSME calculation:** ₹120 Crore - ₹80 Crore = **₹40 Crore**. - Since ₹40 Crore is ≤ ₹100 Crore, the unit remains classified as a **Small Enterprise** (provided its investment is ≤ ₹25 Crore), retaining all priority sector benefits, subsidies, and export incentives!
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