Revised MSME Limits 2026: Who Qualifies Now

Against the 2020 position, the expansion is substantial. A business that lost MSME status in 2023 or 2024 on turnover may well be back inside the definition now.

The test is composite, and the direction of travel matters. An enterprise falls in a category only if both its investment and its turnover are within that category's ceiling. Breach either one and it moves up to the next category.

Moving down is harder. An enterprise is reclassified into a lower category only when it falls below the ceilings for both investment and turnover. This asymmetry is deliberate and it is why an enterprise that had one good year does not bounce between categories.

Two computation rules are commonly missed. Investment is the written down value of plant and machinery or equipment as per the income tax return, and land and building are excluded. Turnover excludes export turnover of goods or services.

The delayed payment protection in Sections 15 to 18 of the MSMED Act applies to micro and small enterprises. It does not apply to medium enterprises. So an enterprise crossing from small into medium loses the right to interest under Section 16 and the right to refer a dispute to the state facilitation council under Section 18.

The same crossing removes the buyer's exposure. Section 43B(h) of the Income-tax Act, 1961 for FY 2025-26, and the corresponding provision of the Income-tax Act, 2025 from Tax Year 2026-27, defers a buyer's deduction only where the supplier is micro or small. If you become medium, your buyers no longer face a tax consequence for paying you late.

Re-run the composite test on your last filed ITR and GST returns rather than on your recollection of the old limits.

If you deregistered or lapsed because you outgrew the old ceilings, check whether you now qualify again.

If you are approaching the small-to-medium boundary, model the cost of losing the payment protection before you capitalise a large asset.

Update the Udyam portal so the certificate reflects the current position, because banks cross-check it against your filings.

No. Reclassification under the revised limits is automatic and is driven by the investment and turnover data the portal pulls from income tax and GST records. What you do need to do is keep the annual update current so the data being read is accurate.

No. Export turnover of goods or services is excluded when computing turnover for MSME classification. An enterprise with Rs 40 crore of exports and Rs 15 crore of domestic sales is tested on the Rs 15 crore figure. This exclusion is written into the classification notification and matters most for export-led units, which would otherwise be pushed into a higher category on gross sales alone.

The written down value of plant and machinery or equipment as per the last filed income tax return. Land and building are excluded. Using gross block instead of written down value inflates the figure and can push an enterprise into a higher category.

You move up. The composite test requires both figures to be within a category's ceiling, so breaching either one moves the enterprise to the next higher category. Moving back down requires falling below both ceilings. This asymmetry is deliberate. It stops enterprises oscillating between categories after a single strong year, and it means a growing business should plan for the upward move rather than expect to drift back down.

The limits notified by S.O. 1364(E) with effect from 1 April 2025 remain the operative thresholds. Budget 2026-27 focused on MSME credit measures rather than on the classification ceilings. Budget 2026-27 focused instead on MSME credit measures, including TReDS as the settlement platform for central public sector purchases from MSMEs and CGTMSE-backed invoice discounting.