MSME Classification 2026: Limits, Udyam Registration and Benefits

India's MSME ceilings changed on 1 April 2025. A micro enterprise may now invest up to ₹2.5 crore and turn over ₹10 crore, a small one ₹25 crore and ₹100 crore, a medium one ₹125 crore and ₹500 crore. Crossing either limit moves a business up a category. Udyam registration is free and opens the door to credit guarantees, subsidies and procurement quotas.

What counts as an MSME in 2026

MSME stands for micro, small and medium enterprise. The category is set under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, and the Ministry of MSME revises the limits by notification. Two tests apply: investment in plant and machinery or equipment, and annual turnover.^[2]

The Union Budget 2025-26 announced that both limits would rise, investment by 2.5 times and turnover by 2 times.^[1] The Ministry notified the new ceilings through Notification S.O. 1364(E) dated 21 March 2025, which took effect on 1 April 2025. It replaced the limits set by Notification S.O. 2119(E) of 26 June 2020.^[2]

The table below sets the 2020 limits against the limits in force today. Both the Udyam portal and the notification use the same figures.^[3][2]

How the composite test works

An enterprise moves up a category when it crosses the ceiling on either test. It moves down only when it falls below the ceiling on both tests. This rule sits in paragraph 3 of the notification.^[2]

Moving up does not end support at once. Under paragraph 8(5), an enterprise that graduates keeps the non-tax benefits of its old category for three years. Under paragraph 8(6), an enterprise that slips to a lower category stays where it is until the financial year ends; the lower status applies only from the following 1 April.^[2]

The portal does not ask for these figures. Investment and turnover are pulled from income-tax and GST records linked to the enterprise's PAN, the Permanent Account Number issued by the Income Tax Department.^[3]

The classification binds buyers too. Section 15 of the MSMED Act requires payment to micro and small enterprises within 45 days. Section 43B(h) of the Income-tax Act allows a buyer to deduct such a purchase only in the year it is actually paid. Companies with dues older than 45 days must also file Form MSME-1 every six months, so a supplier that newly qualifies under the wider limits brings its customers under these rules too.^[5]

Udyam registration: how it works

The Udyam Registration Portal opened on 1 July 2020 and replaced the earlier Udyog Aadhaar Memorandum and Entrepreneurship Memorandum-II.^[1] Registration costs nothing and no document is uploaded. The applicant needs an Aadhaar number. PAN and GSTIN, the Goods and Services Tax identification number, have been required since 1 April 2021 where the enterprise falls under the CGST Act.^[3]

The Udyam number is permanent, the certificate carries a dynamic QR code, and there is no renewal. An enterprise may hold only one Udyam registration, and anyone with an old EM-II or UAM number has to register afresh.^[3]

The Udyam Assist Platform and the live count

Informal micro enterprises use the Udyam Assist Platform, a parallel route that brings them into the formal fold. It makes them eligible for Priority Sector Lending, the share of bank credit that the Reserve Bank directs to specified sectors.^[6]

Registrations climbed from 28.13 lakh in the portal's first partial year, 2020-21, to a peak of more than 2.48 crore in 2023-24, and the combined count stood at 8.84 crore on 30 June 2026.^[7] Closures are rare: 1.37 lakh registered MSMEs shut between 2020 and March 2026, about 0.17% of registrations.^[8]

Benefits of Udyam registration

A Udyam number is the key that most central schemes check. The main gains are credit, payment protection and a share of government buying.^[4]

• Collateral-free loans. The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) guarantees bank loans to micro and small units without security. The guarantee ceiling per borrower was raised from ₹5 crore to ₹10 crore, and 29.03 lakh guarantees worth ₹3.77 lakh crore were approved between 1 January and 30 November 2025.^[4]
• Protection against late payment. The MSME Samadhaan portal routes delayed-payment claims to MSE Facilitation Councils. By June 2026 it had received 2,56,892 applications claiming ₹55,244.29 crore, of which 58,148 cases were disposed of.^[4]
• Invoice financing. TReDS, the Trade Receivables Discounting System, is an electronic platform on which an MSME sells its unpaid invoices to financiers. It had unlocked more than ₹7 lakh crore for MSMEs by February 2026.^[6]
• Government orders. Central ministries and public sector enterprises must buy 25% of their annual purchases from micro and small enterprises. Within that, 4% is reserved for SC/ST-owned and 3% for women-owned units, and 358 items are reserved outright. In 2023-24 they bought ₹74,717 crore of goods and services from MSEs, 43.71% of their procurement.^[1]
• Quality certification. Zero Defect Zero Effect (ZED) certification had 93.61 lakh MSMEs registered and 6.68 lakh certified by May 2026.^[4]
• A grievance channel. The CHAMPIONS portal received 39,494 complaints in 2025-26 and resolved 39,387 of them, a 99.72% disposal rate.^[4]

What the last two Budgets added

The 2025-26 Budget added credit products tied to the Udyam number. Micro enterprises on the portal get a customised credit card with a ₹5 lakh limit, with 10 lakh cards planned in the first year. Five lakh first-time women, Scheduled Caste and Scheduled Tribe entrepreneurs can take term loans of up to ₹2 crore over five years. Start-ups saw their guarantee cover double to ₹20 crore, and exporter MSMEs can take guaranteed term loans of up to ₹20 crore.^[1]

The 2026-27 Budget went further on equity and liquidity. It announced a ₹10,000 crore SME Growth Fund and added ₹2,000 crore to the Self-Reliant India Fund. It made TReDS the settlement platform for all purchases from MSMEs by central public sector enterprises, and proposed CGTMSE-backed guarantees for invoice discounting on TReDS. It also removed the ₹10 lakh per-consignment cap on courier exports.^[6]

Main schemes and what they pay

The Prime Minister's Employment Generation Programme (PMEGP) is the largest subsidy scheme. It pays "margin money", a capital subsidy, on bank loans for new micro enterprises in the non-farm sector. Projects of up to ₹50 lakh in manufacturing and ₹20 lakh in services qualify.

General-category applicants get 15% in urban and 25% in rural areas. Special categories get 25% and 35%: women, SC, ST, OBC, minority, ex-servicemen, transgender and differently-abled applicants, and units in the North East, hill, border and aspirational districts.^[1]

The applicant puts in 10% of the project cost, or 5% in the special categories. Applicants must be at least 18, and need an eighth-standard pass for projects above ₹10 lakh in manufacturing or ₹5 lakh in services.^[9]

How much MSMEs matter to the economy

On January 2026 data the sector contributed about 31.1% of GDP, 35.4% of manufacturing output and 48.58% of exports, and employed more than 38.9 crore people, second only to agriculture.^[4] The share of MSMEs in Gross Value Added rose from 27.3% in 2020-21 to 30.1% in 2022-23.^[1]

Exports from MSMEs climbed from ₹3.95 lakh crore in 2020-21 to ₹12.39 lakh crore in 2024-25, and the number of exporting MSMEs went from 52,849 to 1,73,350 over the same period.^[1] The Ministry of MSME's budget estimate for 2025-26 was ₹23,168.15 crore, up from ₹7,011.29 crore in 2019-20.^[1]

Credit delivery is also moving online. Between 1 April and 31 December 2025, public sector banks sanctioned more than 3.96 lakh MSME loan applications worth over ₹52,300 crore through a digital Credit Assessment Model. The model appraises loans from verified data instead of paper files.^[4]

Who lends to MSMEs: four NBFCs in The Company Check's records

Beyond banks, a set of non-banking financial companies (NBFCs) specialise in small-business credit. An NBFC is a lender licensed by the Reserve Bank that cannot take demand deposits. The Company Check's records show the scale of four of the larger specialist lenders.^[10]

U GRO Capital is listed on the NSE and BSE and lends to small businesses across India.^[10] Incorporated in Mumbai on 10 February 1993, it reported revenue of ₹2,021.11 crore and a net profit of ₹174.81 crore for the year ended 31 March 2026, according to The Company Check's records. It had 2,298 employees and 12 directors.^[10]

Kinara Capital of Bengaluru makes collateral-free loans to MSMEs. The company was incorporated on 3 December 1996, had 1,201 employees, and posted revenue of ₹692.13 crore with a net profit of ₹8.29 crore in FY2024-25. It has raised USD 122.7 million over its funding rounds, the last a Series E in December 2024, from investors including BlueOrchard, British International Investment and Nuveen.^[11]

NeoGrowth, a Mumbai digital credit platform for small and micro retailers, recorded revenue of ₹750.31 crore and a net profit of ₹9.02 crore in FY2024-25. Its backers include FMO, Omidyar Network and Khosla Impact, and its most recent round, a Series D tranche of USD 8.78 million, closed on 9 October 2026.^[12]

Lendingkart Finance, also registered in Mumbai, lends working capital to SMEs through its platform. It booked revenue of ₹866.99 crore in FY2024-25 but a net loss of ₹288.34 crore, against a profit of ₹115.66 crore two years earlier.^[13]

The figures above are from The Company Check's company records and are the latest filed year for each lender.^{[10][13][12][11]}

What to do next

Check the category first. Take investment in plant, machinery or equipment from the latest income-tax return and turnover from GST returns. Set them against the ceilings: ₹2.5 crore and ₹10 crore for micro, ₹25 crore and ₹100 crore for small, ₹125 crore and ₹500 crore for medium.^[2]

If the enterprise is not yet registered, do it on udyamregistration.gov.in with the owner's Aadhaar, PAN and GSTIN. There is no fee, no upload and no renewal.^[3] An invoice unpaid after 45 days can be filed on the MSME Samadhaan portal, which sends it to an MSE Facilitation Council.^[5][4]

For credit, ask the bank for a CGTMSE-covered loan; the guarantee now reaches ₹10 crore per borrower and needs no collateral.^[4] A new manufacturing or service unit can apply for PMEGP margin money on its bank loan; the subsidy runs from 15% to 35% of a project of up to ₹50 lakh.^[1] Buyers should watch the 45-day clock on micro and small suppliers' bills, because Section 43B(h) defers the tax deduction until the bill is paid.^[5]