An MSME is classified under Section 7 of the MSMED Act using two composite criteria, investment and annual turnover, with thresholds notified by the central government. Under the limits in force from 1 April 2025, a micro enterprise has investment up to ₹2.5 crore and turnover up to ₹10 crore; small, up to ₹25 crore and ₹100 crore; medium, up to ₹125 crore and ₹500 crore. The same criteria apply to manufacturing and service enterprises.
How MSME classification works in India
| Category | Investment up to | Turnover up to |
|---|---|---|
| Micro | ₹2.5 crore | ₹10 crore |
| Small | ₹25 crore | ₹100 crore |
| Medium | ₹125 crore | ₹500 crore |
Investment means the written-down value of plant and machinery or equipment (excluding land and buildings) as per the income-tax return. Turnover is taken from GST returns, excluding exports. An enterprise must satisfy both limits to stay in a category. Udyam pulls these figures automatically, so classification updates each year. Before April 2025 the limits were ₹1 crore/₹5 crore, ₹10 crore/₹50 crore and ₹50 crore/₹250 crore; claims for earlier periods are judged on the limits then in force.
Why it matters for getting paid
The category decides the legal route. A micro or small supplier can use MSME Samadhaan and claim three times the bank rate; a medium enterprise cannot, and uses a legal notice, a summary suit or arbitration instead. Buyers' Section 43B(h) obligation and MSME-1 reporting also apply only to dues owed to micro and small enterprises. Check your category on your Udyam certificate before you decide how to pursue a buyer.
How FundRaksha uses it
FundRaksha's free case assessment begins with classification: micro and small clients are routed to the MSMED Act strategy, medium and unregistered clients to the contractual and civil route. Both get a dedicated advocate within 24 hours and pay 30% only on recovery. Across 1,000+ businesses the company has seen every category.
Worked example (hypothetical)
A Rajkot pump manufacturer has plant and machinery of ₹18 crore (written-down value) and turnover of ₹90 crore, of which ₹30 crore is exports. Turnover for classification is ₹60 crore. Investment ₹18 crore is within the small limit (₹25 crore) and turnover ₹60 crore is within ₹100 crore, so it is a small enterprise and its ₹40,00,000 overdue invoice to a Chennai OEM qualifies for Samadhaan. Assuming a 6.5% bank rate (19.5% a year, monthly rests), one year of delay carries interest of about ₹8,53,600.
Last reviewed: 2026-10-08. Information for Indian businesses; not legal advice.