One Person Company (OPC) Taxation, Compliance, and Annual Filing Guide

A One Person Company is a type of private limited company introduced under the Companies Act 2013, offering simplified One Person Company compliance and full managerial control to a single owner. Unlike traditional companies requiring multiple members, an OPC has only one shareholder who also acts as the sole director, providing full control over business decisions while enjoying the benefits of a separate legal entity.

These features are structured to align with Companies Act 2013 compliance norms, ensuring the OPC enjoys a separate legal identity while following essential regulatory mandates. The sole member must be a natural person, an Indian citizen, and a resident in India and must nominate a nominee to take over in case of death or incapacity. OPCs cannot engage in certain activities like non-banking financial investment and must adhere to restrictions on conversion to other company types within the first two years unless turnover or capital limits are exceeded.

OPC Taxation Rules in India: Key Provisions:

Understanding the taxation rules is a core part of ensuring proper One Person Company compliance under Indian corporate laws.

• Corporate Tax Rate: Under the current OPC taxation rules in India, OPCs are taxed as companies under the Income Tax Act, 1961, at a flat rate of 30% on net profits. Surcharge and health & education cess are also applicable as per standard company tax rules.
• No Special Tax Advantage: OPCs do not enjoy any special tax concessions compared to other private limited companies. The same tax rates, surcharges, and compliance requirements apply.
• Minimum Alternate Tax (MAT for OPC): MAT provisions are applicable to OPCs, similar to other companies.
• New Tax Regimes: Newly incorporated manufacturing OPCs may opt for a concessional tax rate of 15% under Section 115BAB, and other OPCs can opt for a 22% rate under Section 115BAA, subject to certain conditions.
• Tax Deducted at Source (TDS): OPCs must comply with TDS provisions from the outset, regardless of turnover, unlike sole proprietorships, where TDS applies only after certain thresholds.
• Annual Tax Filing: OPCs are required to file an income tax return annually under Section 139(1) of the Income Tax Act, 1961, and maintain proper books of accounts and audits.

An OPC in India must adhere to several annual One Person Company compliance obligations to maintain its legal standing. The key annual compliance requirements include:

• Board Meeting: At least one board meeting must be held in each half of the calendar year, with a minimum gap of 90 days between the meetings.
• Appointment of Auditor: An auditor appointment OPC must be done within 30 days of incorporation, and the company’s accounts must be audited annually by a Chartered Accountant.
• Filing of Financial Statements (AOC-4 filing for OPC): Audited financial statements, including the balance sheet and profit and loss account, must be filed with the Registrar of Companies (ROC) within 180 days from the end of the financial year.
• Filing of Annual Return (MGT-7A form for OPC): The annual return must be filed with the ROC within 60 days from the completion of six months after the financial year ends.
• Director KYC (director KYC DIR-3 for OPC): Directors must complete their KYC annually by September 30th of the following financial year.
• Income Tax Return Filing: OPCs must file their income tax return by the due date prescribed under the Income Tax Act.
• Disclosure of Interest: Directors must disclose their interest in other entities at the first board meeting of each financial year using Form MBP-1 and submit a declaration in Form DIR-8 regarding their non-disqualification.
• Statutory Registers: Maintain statutory registers as required by the Companies Act, 2013, including registers of members, directors, and share certificates.

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OPC Annual Filing Deadlines and Forms:

These deadlines form a crucial part of the One Person Company compliance checklist that every OPC must follow. Here are the key annual filing forms and their deadlines for a One Person Company (OPC) in India:

• GST Registration: GST registration for a One Person Company is mandatory if its annual turnover exceeds Rs 20 lakhs for services or Rs 40 lakhs for goods. GST registration is also mandatory for OPCs supplying goods or services outside their home state or operating via e-commerce platforms, regardless of turnover.
• Registration Process: The process is fully online via the GST portal. In the GST registration form (REG-01), OPCs should select "Others" under the "Constitution of Business" and specify "One Person Company" in the text field.
• GST Returns: OPCs registered under GST must file periodic GST returns through the GST portal. The frequency and type of return (GSTR-1, GSTR-3B, etc.) depend on turnover and business activities. For OPCs with turnover up to Rs 5 crores, quarterly filing may be available.

Consequences of Non-Compliance:

Failure to adhere to One Person Company compliance norms can lead to legal and financial penalties. The following are the consequences of non-compliance:

1. Delay in filing annual financial statements (Form AOC-4) attracts a penalty of Rs 100 per day, up to a maximum of Rs 10,000.
2. Failure to appoint an auditor results in a penalty of Rs 300 per month.
3. For broader non-compliance, initial penalties can be Rs 10,000 for the company and each officer, with an additional Rs 100 per day until compliance, capped at Rs 2 lakh for the company and Rs 50,000 for officers.
4. Under Section 172 of the Companies Act, the penalty can be Rs 50,000 for the company and officers, plus Rs 500 per day for continuing default, with maximums of Rs 3 lakh for the company and Rs 1 lakh for officers.
5. In severe cases, persistent non-compliance can result in the Registrar of Companies (ROC) striking the company off the register, effectively dissolving the company.
6. Directors and officers in default may face personal penalties, including fines and, in extreme cases, imprisonment for serious violations or fraudulent filings.
7. Non-compliance can trigger investigations, legal proceedings, and reputational damage, potentially affecting business continuity and access to credit or government benefits.

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To ensure smooth One Person Company compliance, it’s essential to maintain organized records, follow timelines, and seek professional guidance.

• Maintain a Compliance Calendar: Track all important deadlines for filings such as financial statements (AOC-4), annual returns (MGT-7A), income tax returns, and director KYC (DIR-3 KYC) to avoid last-minute rushes and penalties.
• Appoint an Auditor Promptly: Ensure a practicing Chartered Accountant is appointed as the first auditor within 30 days of incorporation. Schedule annual audits in advance to meet statutory requirements.
• Organize and Preserve Key Documents: Keep receipts of purchases/sales, expense invoices, bank statements, GST returns, TDS challans, and statutory registers updated and ready for annual filings and audits.
• Conduct Required Board Meetings: Hold at least one board meeting in each half of the calendar year, with a minimum gap of 90 days between meetings, and document the proceedings.
• Timely Filing of Returns: File annual returns (MGT-7A) and audited financial statements (AOC-4) with the ROC within the stipulated deadlines—180 days from the close of the financial year for AOC-4 and within 60 days after 180 days for MGT-7A.
• Complete Director KYC Annually: Ensure the director completes DIR-3 KYC by September 30th each year to keep the Director Identification Number (DIN) active.
• Appoint and Update Nominee Details: Always maintain an updated nominee for the OPC as required by law, and file necessary forms if there are any changes.
• Use Professional Help: Engage a company secretary or compliance expert to review filings, maintain statutory registers, and ensure all regulatory obligations are met.

In summary, maintaining proper taxation, compliance, and annual filings is essential for the smooth functioning and legal standing of a One Person Company (OPC) in India. While OPCs offer entrepreneurs the benefits of limited liability, a corporate structure, and simplified management, these advantages come with the responsibility of adhering to statutory requirements, such as the timely appointment of auditors, filing of annual returns (MGT-7A), submission of audited financial statements (AOC-4), director KYC, and regular tax filings.

Non-compliance can result in significant financial penalties, loss of company status, and disqualification of directors, underscoring the importance of diligent recordkeeping and timely submissions. By proactively managing One Person Company compliance, business owners can build credibility, avoid legal troubles, and focus on growth.

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