diff --git a/README.md b/README.md
index d69b7cb8c5..5102316897 100644
--- a/README.md
+++ b/README.md
@@ -22,23 +22,32 @@ with the latest images, and will prevent build failures within Rancher when atte
 
 #### Versioning Charts
 
-In this repository, all packages specify the `version` field in the `package.yaml`.
+There are two kinds of charts that exist in this repository. One is upstream charts and another is local charts. For each type the versioning is different.
 
-The versioning scheme roughly corresponds to the following rules (with exceptions):
-- Major Version: represents the Rancher minor version these charts are being released to.
+##### Upstream Charts
+
+In this repository, all packages specify the `version` field in the `package.yaml`. The upstream charts follow this versioning X.Y.P[+upX.Y.Z] 
+X.Y.Z is the upstream chart's major.minor.patch.
+
+The X.Y.P versioning scheme roughly corresponds to the following rules (with exceptions):
+- **Major Version**: represents the Rancher minor version these charts are being released to.
   - Anything less than `100`: Rancher 2.5
   - `100`: Rancher 2.6
   - `101`: Rancher 2.7
   - `102`: Rancher 2.7
   - `103`: Rancher 2.8
   - etc.
-- Minor Version: represents a release line of a given chart within a Rancher minor version.
-- Patch Version: represents a patch to a given release line of a chart within a Rancher minor version.
+- **Minor Version**: represents a release line of a given chart within a Rancher minor version.
+- **Patch Version**: represents a patch to a given release line of a chart within a Rancher minor version.
 
 As a rule of thumb, you will only ever touch this version to **increment the patch version once per Rancher patch release**. Once it has been incremented, it should not be incremented again until the next Rancher patch release, even if the chart points to an upstream that has been modified.
 
 For more information on how package versioning works, please see [`docs/developing.md`](docs/developing.md).
 
+##### Local Charts
+
+- For local charts, we don't follow any complex versioning scheme. Only one semver, versioning scheme x.x.x is being followed.
+
 #### Rancher Version Annotations
 
 In addition to modifying the chart version, the `catalog.cattle.io/rancher-version` annotation is required for user-facing charts which show up in Rancher UI; there is no need to add the annotation to CRD charts or internal charts (like fleet).
@@ -116,4 +125,4 @@ For more information on commands that can be run in this repository, please see
 
 For more information on `Packages`, please see [`docs/packages.md`](docs/packages.md).
 
-For more information on CI, please see [`docs/validation.md`](docs/validation.md).
\ No newline at end of file
+For more information on CI, please see [`docs/validation.md`](docs/validation.md).