Setting up a One Person Private Limited Company (OPC) is a popular choice for solo entrepreneurs who want the benefits of limited liability and corporate structure. But how does taxation work for OPCs? Let’s break it down! 👇
An OPC is treated like any other private limited company in the eyes of tax authorities. It is a separate legal entity and pays corporate tax on its profits.
Current corporate tax rate:
22% (if turnover is below ₹400 crore and no exemptions claimed)
30% for others
Surcharge and cess: Additional surcharge (up to 12%) and health & education cess (4%) apply.
Earlier, companies had to pay DDT on dividends paid to shareholders. But now:
Dividends are taxed in the hands of the shareholder (you, the OPC owner), not the company.
You must report dividend income and pay tax as per your income tax slab.
Since the sole owner can be the director:
Salary paid to yourself is a business expense, deductible from company profits.
The salary is taxable as personal income for you.
The company must deduct TDS (Tax Deducted at Source) on salary payments.
The OPC must file Income Tax Returns (ITR-6) annually.
Maintain proper books of accounts and get them audited if turnover exceeds ₹1 crore or income exceeds ₹50 lakh.
File GST returns if registered under GST.
If your OPC claims multiple exemptions or deductions and the tax calculated is less than 15% of the book profit, you must pay MAT.
Current MAT rate: 15% + surcharge + cess.
MAT credit can be carried forward for 15 years.
OPCs can set off losses against other income.
Business losses can be carried forward for 8 years and set off against future profits.
| Tax Aspect | Key Points |
|---|---|
| Corporate Tax | 22% / 30% + surcharge & cess |
| Dividend Tax | Taxed in shareholder hands |
| Director Salary | Deductible expense; taxable to director |
| Tax Filing | ITR-6, audit if applicable |
| Minimum Alternate Tax (MAT) | 15% of book profit if lower tax liability |
| Loss Set-Off | Loss carry forward for 8 years |
An OPC enjoys limited liability and easier compliance, but understanding its tax implications helps in planning better and staying compliant. Always consult a tax advisor for personalized advice!