The foundation of the Indian economy, Micro, Small, and Medium-Sized Enterprises (MSMEs), plays a crucial role in the nation’s development. Before Udyam Registration, MSMEs were registered under the Udyog Aadhaar system, which was introduced in 2015. To streamline the registration process and integrate with other government systems, the Udyam Registration system replaced the Udyog Aadhaar in 2020. MSMEs can register through self-declaration on the online portal. Upon successful registration, businesses receive a unique 16-digit Udyam Registration Number and an e-certificate, which facilitates access to various government schemes and incentives.
In this guide, we will explore the meaning of MSMEs, their classification criteria, the Udyam registration process, benefits, eligibility requirements, necessary documents, and the online procedure for registering MSMEs in detail.
What is an MSME?
MSME stands for Micro, Small, and Medium Enterprises. These are businesses defined under the Micro, Small, and Medium Enterprises Development (MSMED) Act, 2006. Unlike large companies, MSMEs operate with limited capital and a smaller workforce, but are highly adaptable to market changes and localized needs. MSMEs contribute to generating employment in both rural and urban areas, supporting balanced regional development.
MSMEs are classified based on a composite criterion that considers both the investment in plant and machinery (or equipment) and the enterprise’s annual turnover.
MSME Classification (From 1st April 2025)
| Type | Investment Limit | Turnover Limit |
| Micro | Up to ₹2.5 crores | Up to ₹10 crores |
| Small | Up to ₹25 crores | Up to ₹500 crores |
| Medium | Up to ₹125 crores | Up to ₹500 crores |
Benefits of Udyam Registration
- Easier Access to credit: Registered MSMEs are qualified for collateral-free loans and usually get loans at interest rates up to 1.5% lower than the standard rates.
- Access to Government Schemes and Incentives: Registered MSMEs can avail of financial assistance programs from the Government of India, such as the Credit-Linked Capital Subsidy Scheme (CLCSS).
- Preference in Tenders: Many government tenders and contracts reserve a portion of tenders exclusively for MSMEs.
- Custom Duty Benefits: MSMEs can avail themselves of concessions on customs duties for importing raw materials and capital goods. Imported raw materials are eligible for lower duties under the Import of Goods at Concessional Rate (IGCR) program. Additionally, MSMEs can get subsidies for ISO certification, concessions on electricity bills, etc, such as:
- Tamil Nadu 50% grant for setting up effluent treatment plants and a 25% capital subsidy for micro-enterprises on plant and machinery purchases.
- Uttar Pradesh provides a 50% interest subsidy for micro-enterprises and complete exemption from stamp duty in certain areas.
- Tax Benefits: Registered MSMEs are eligible for various tax benefits:
| Category | Benefit |
| Reduced Corporate Tax Rates
|
MSMEs with turnovers under ₹400 crore are eligible for a concessional tax rate of 25%. |
| Presumptive Taxation Scheme (Section 44AD)
|
MSMEs with annual turnovers up to ₹3 crores can declare 8% of their turnover as income (6% for digital transactions) without maintaining detailed accounts. |
| Tax Holidays for Start-ups (Section 80-IAC) | Eligible MSMEs can avail of profit-linked tax holidays for three consecutive years within the first ten years of incorporation, |
| Depreciation Benefits
|
MSMEs can claim accelerated depreciation on assets like machinery, allowing higher deductions in the initial year. |
| Carry Forward of Losses | If MSMEs file their Income Tax Returns in a timely manner, they can carry forward business loans for 8 years to offset future business income. |
| Goods and Services Tax (GST) Benefits | MSMEs may opt for the Composition Schemes, which offer reduced GST rates between 1% and 6%. |
Who Can Register Under Udyam?
The process is available for a wide range of legal entities, including:
- Sole proprietorships
- Partnership firms
- Limited Liability Partnerships (LLPs)
- Private and public limited companies
- Co-operative societies, trusts, and self-help groups
Note: The enterprise must be registered and operating in India, and the enterprise must match the above-mentioned turnover criteria
Documents Required for the Udyam Registration
1. Aadhar Card
- For the sole proprietorship, the business owner’s Aadhar card shall be used.
- For the Partnership Firm or LLP, the Aadhaar cards of the managing, authorized, or designated partners shall be used.
- For the Private or Public Limited Companies, Authorized Signatory Aadhar cards shall be used.
2. Business Address Proof
- Certificate of Incorporation for the company and Partnership Deed and LLP Agreement for the LLP
3. Business Account details of the authorized signatory
4. Details of the nature of business activity
5. National Industrial Classification Code
6. Investment & Turnover Details of the business
Process for Udyam Registration
The MSME registration process at Udyam is entirely free and paperless. Follow the step-by-step guide to register yourself at the Udyam Registration Portal:
Step 1: Visit the Official Udyam Registration Portal at https://udyamregistration.gov.in/
Step 2: Choose the Appropriate Registration Option: On the homepage, you will find options for new entrepreneurs and those already having Udyog Aadhaar registrations. If you are a new entrepreneur, click on the option labeled “For New Entrepreneurs who are not Registered yet as MSME or those with EM-II.”
Step 3: On the portal, enter your Aadhaar Details. After entering the details, click on “Validate & Generate OTP.” An OTP (One-Time Password) will be sent to your registered mobile number linked with Aadhaar. Enter this OTP to verify the details.
Step 4: Enter your PAN details
Step 5: Enter the details of your business:
- Enterprise Name: The legal name of your business.
- Type of Organization: Select from options like Proprietorship, Partnership, LLP, Private Limited Company, etc.
- Business Address: Principal place of business operations.
- Date of Commencement of business: When your business started operations.
- Previous Registration Details: If you have been registered previously under EM-II or UAM, please provide those details.
- The bank details of the enterprise, including the IFSC code.
Step 6: Select the primary activity of your business and select the appropriate National Industrial Classification (NIC) Code that corresponds to your business activity.
Step 7: Enter the Investment and Turnover Details of your business
Step 8: Submit the details
After filling in all the required details, accept the declaration at the end of the form. Click on “Submit and Get Final OTP.” An OTP will be sent to your registered mobile number. After entering the OTP, your registration process will be completed, and you will receive a Udyam Registration Number (URN). This certificate contains a QR code that links to your enterprise’s details on the Udyam portal.
Conclusion
Udyam Registration is a significant step towards formalizing the MSME sector in India. It provides a streamlined and integrated approach. Udyam creates a unified identity system for MSMEs. It provides an integrated approach to registration and benefits. With the revised classification criteria effective from April 1, 2025, more enterprises can now avail themselves of the advantages offered to MSMEs. It is the gateway through which MSMEs can transition from survival to structured scalability.
