MSME Compliance Checklist for 2026

Essential regulatory requirements every MSME must comply with this year, including new amendments and deadlines.

Compliance for an MSME isn't about checking boxes — it's about knowing which obligations actually apply at your stage of growth, and getting those handled cleanly so you can focus on the business. This checklist walks through the obligations that affect most micro, small, and medium enterprises in India through FY 2026-27.

First: are you definitely an MSME?

Classification under the MSMED Act, 2006 as amended, is based on investment in plant & machinery (or equipment for services) AND annual turnover. The current thresholds, indicative:

• **Micro** — Investment up to Rs. 1 crore AND turnover up to Rs. 5 crore
• **Small** — Investment up to Rs. 10 crore AND turnover up to Rs. 50 crore
• **Medium** — Investment up to Rs. 50 crore AND turnover up to Rs. 250 crore

If you cross any limit in either dimension you move up; you can be re-classified on a self-declaration basis through the Udyam Registration portal.

Holding a valid Udyam Registration matters for several practical reasons — eligibility for delayed-payment protection under Section 15-24 of the MSMED Act, priority-sector lending benefits from banks, eligibility for GeM and government tenders, and access to certain subsidy schemes.

Income tax obligations

• **ITR filing** — applicable form depends on entity type (ITR-3 / ITR-4 / ITR-5 / ITR-6). Tax audit under Section 44AB triggers above the prescribed turnover threshold (Rs. 1 crore for business, Rs. 50 lakh for profession, with a higher Rs. 10 crore limit for businesses where cash receipts/payments are within 5%).
• **TDS/TCS compliance** — covers payments like salaries, contractor fees, professional fees, rent, interest, commission, etc. Returns are quarterly (Form 24Q for salary, 26Q for non-salary, 27Q for non-residents).
• **Advance tax** — quarterly instalments if annual tax liability exceeds Rs. 10,000.

A specific item to watch: **delayed payments by buyers to MSMEs**. Under Section 43B(h) of the Income-tax Act, where a buyer is liable to pay an MSME within the time-frame fixed by the MSMED Act, any unpaid amount beyond that time-frame is disallowed as a deduction in the buyer's books in that year. This makes timely payment a tax issue for the buyer, not just a commercial one — and it has materially changed how larger companies process MSME invoices.

GST obligations

• **Registration** — mandatory above the turnover threshold (Rs. 40 lakh for goods, Rs. 20 lakh for services in most states; Rs. 20 lakh / Rs. 10 lakh in special-category states) and for inter-state supply / e-commerce / RCM categories regardless of turnover.
• **Returns** — GSTR-1 (monthly or quarterly under QRMP), GSTR-3B (monthly), GSTR-9 (annual, optional below Rs. 2 crore turnover), GSTR-9C (above Rs. 5 crore).
• **E-way bills and e-invoicing** — e-invoicing is mandatory for businesses above the prescribed turnover threshold; check the current threshold notification.
• **ITC reconciliation** — the gap between auto-populated 2B and books-availed ITC is the leading cause of GST scrutiny. Reconcile monthly, not annually.

Companies Act / LLP Act obligations

For Private Limited Companies:

• Hold AGM within 6 months of FY-end
• File AOC-4 (financials) within 30 days of AGM
• File MGT-7 (annual return) within 60 days of AGM
• DIR-3 KYC annually for all directors
• DPT-3 by 30 June for deposits and money received not in the nature of deposits
• Board meetings — minimum 4 per year (relaxations for small companies and OPCs)

For LLPs:

• Form 11 (annual return) by 30 May
• Form 8 (statement of accounts and solvency) by 30 October
• DIR-3 KYC for designated partners

Non-compliance attracts daily penalties and, in extreme cases, director disqualification and DIN deactivation. The cost of fixing late filings has gone up significantly over the past two years.

Labour and ESI/PF

If you employ staff above the prescribed thresholds:

• **PF (EPFO)** — applicable when 20 or more employees; monthly ECR by 15th of next month
• **ESI** — applicable in notified areas when 10 or more employees and wages within the threshold; monthly contribution by 15th
• **Professional Tax** — state-specific; varies in Maharashtra, Karnataka, West Bengal, etc.
• **Shops & Establishments Act registration** — state-specific
• **POSH compliance** — Internal Complaints Committee (IC) for organisations with 10+ employees; annual report

The Labour Codes (Wages, Industrial Relations, Social Security, Occupational Safety) consolidate many of these into four codes; implementation is staggered and state-by-state.

Other items often missed

• **MSME Form 1** — half-yearly return for companies disclosing payments outstanding to MSME suppliers beyond 45 days
• **TDS on payments to non-residents under Section 195** — applies to foreign service payments, royalties, technical fees; Form 15CA / 15CB process
• **Trademark renewal** — every 10 years if you've registered the brand
• **Annual returns to industry regulators** — sector-specific (FSSAI, drug controllers, BIS, etc.)
• **POSH annual report** — to be filed with the district authority

A practical approach

Don't try to track all of this manually. The realistic options:

1. Use a compliance-calendar tool (several Indian compliance platforms offer this) 2. Engage a chartered accountancy firm for outsourced compliance, with a shared calendar and assigned owners 3. Hire an in-house company secretary at scale (typically beyond Rs. 100 crore turnover)

Whichever approach you pick, the critical decision is to make compliance routine and predictable — not a fire-fight at year-end. Most penalties our clients have faced over the years came from missed deadlines, not from fundamental disagreements with the regulator.

If you'd like a one-off compliance health check or want to explore whether outsourcing compliance to our team makes sense for your business, please reach out through the contact page.