A One Person Company registered under the Companies Act, 2013 is taxed as a domestic company, not as an individual. The OPC income tax rate is therefore a corporate rate: most OPCs pay an effective 25.17 percent under the concessional regime in Section 115BAA, while those that stay on the standard regime pay a base rate of 25 or 30 percent (plus surcharge and cess) depending on prior-year turnover. New manufacturing OPCs may qualify for an even lower 15 percent base rate under Section 115BAB. The right choice depends on whether your company relies on specific deductions that the concessional rates require you to give up.
Standard Regime Rates
Under the standard regime, the base rate depends on turnover in the financial year immediately before the one being assessed. If that turnover did not exceed ₹400 crore, the base rate is 25 percent. If it crossed ₹400 crore, the rate is 30 percent.1Income Tax Department. Tax Rates In practice, almost every OPC sits in the 25 percent bracket, because the ₹400 crore ceiling is well above what a single-member company typically generates.
The base rate applies to net taxable income: gross receipts minus allowable business expenses, depreciation, and deductions. On top of the base rate sit two further layers.
Surcharge
Surcharge is a percentage of the tax itself, set by net income band:
- Net income up to ₹1 crore: no surcharge.
- Net income above ₹1 crore but not above ₹10 crore: 7 percent of the tax.
- Net income above ₹10 crore: 12 percent of the tax.
Marginal relief applies at each threshold so that crossing ₹1 crore or ₹10 crore by a small amount does not increase the total tax by more than the extra income itself.1Income Tax Department. Tax Rates
Health and Education Cess
A 4 percent Health and Education Cess applies to the sum of base tax and surcharge. The cess is universal and does not depend on income level.
Effective Rates
Running the arithmetic for a typical OPC on the 25 percent base rate:
- No surcharge tier: 26 percent effective.
- 7 percent surcharge tier: roughly 27.82 percent effective.
- 12 percent surcharge tier: roughly 29.12 percent effective.
Section 115BAA: The 22 Percent Concessional Rate
Section 115BAA of the Income Tax Act, 1961 lets any domestic company, including an OPC, be taxed at a flat 22 percent regardless of turnover.2Income Tax Department. Section 115BAA Surcharge under this regime is a flat 10 percent of the tax at every income level, and the same 4 percent cess applies on top.1Income Tax Department. Tax Rates The effective rate works out to 25.17 percent, which for most OPCs is lower than the standard regime at any surcharge tier.
The trade-off is that you must compute income without claiming a range of incentives:
- Special Economic Zone benefits under Section 10AA.
- Additional depreciation under Section 32(1)(iia).
- Most Chapter VI-A deductions, except Section 80JJAA (new employee hiring) and Section 80M (inter-corporate dividends).
- Investment-linked deductions under Sections 35AD, 33AB, and 33ABA.
- Carried-forward losses attributable to any of the forgone deductions.
If your OPC does not lean on these incentives, 115BAA is the straightforward choice.2Income Tax Department. Section 115BAA
How to Elect It, and Why It Sticks
To opt in, file Form 10-IC through the e-filing portal on or before the due date for filing the return for the year the option is to take effect.3Income Tax Department. Form 10-IC User Manual Once made, the election carries forward to every later year and cannot be voluntarily withdrawn.4Income Tax Department. Form 10-IC FAQ The only exit route is violating one of the section’s conditions in a later year, which invalidates the election going forward and returns the company to the standard regime.
Section 115BAB: 15 Percent for New Manufacturing OPCs
An OPC incorporated on or after October 1, 2019 and engaged in manufacturing may qualify for Section 115BAB, which sets the base rate at 15 percent.5Income Tax Department. Section 115BAB Surcharge is the same flat 10 percent as under 115BAA, and the 4 percent cess applies, giving an effective rate of roughly 17.16 percent.1Income Tax Department. Tax Rates
Eligibility is stricter than 115BAA. The company must commence manufacturing or production by a date specified in the provision, must not be formed by splitting or reconstructing an existing business, and must not use previously used plant and machinery beyond a prescribed limit. Any non-manufacturing income earned by the company is taxed at 22 percent instead of 15 percent.5Income Tax Department. Section 115BAB If the company later breaches the manufacturing conditions, the 115BAB election becomes invalid and the company can then move to 115BAA.
Minimum Alternate Tax
Minimum Alternate Tax under Section 115JB acts as a floor on the standard regime. If the tax owed under normal computation falls below 15 percent of book profits, the company pays 15 percent of book profits (plus applicable surcharge and cess) instead.6Press Information Bureau. Corporate Tax Rates Slashed to 22% for Domestic Companies and 15% for New Domestic Manufacturing Companies The rate was reduced from 18.5 percent to 15 percent from Assessment Year 2020-21.
The important point for OPC owners: companies that elect Section 115BAA or 115BAB are completely exempt from MAT. The calculation simply does not apply. This is one reason smaller companies that previously found MAT hard to plan around have moved to 115BAA. If you stay on the standard regime, MAT still applies and can push your liability above what normal computation would produce in years where book profits run high relative to taxable income.
The Second Layer: Tax on Dividends
The company’s tax bill is only half the picture. When your OPC distributes profits to you as dividends, that income is taxed again at your personal slab rates.7Income Tax Department. Taxation of Dividend and Interest India abolished the Dividend Distribution Tax in April 2020, shifting the burden from the company to the shareholder. As the sole member, every dividend you declare flows straight to your individual return.
The company must deduct TDS at 10 percent on dividends paid to a resident shareholder under Section 194, once the total dividend crosses ₹5,000 in a financial year.8Income Tax Department. TDS Rates You can claim credit for this TDS when filing your personal return. The only deduction available against dividend income is interest expense incurred to earn it, capped at 20 percent of total dividend income.7Income Tax Department. Taxation of Dividend and Interest
This second layer matters when comparing an OPC to a sole proprietorship, where business income is taxed once at personal slab rates. At lower income levels, the combined corporate-plus-dividend burden can exceed what a proprietor would pay. The 25.17 percent corporate rate looks attractive on its own, but adding a 30 percent personal slab on the dividend raises the overall extraction cost considerably.
Advance Tax Installments
Unlike individual taxpayers who can push most of their liability to year-end self-assessment, every company, including an OPC, must pay advance tax in four installments during the financial year:
- By June 15: at least 15 percent of estimated annual tax.
- By September 15: at least 45 percent cumulative, minus amounts already paid.
- By December 15: at least 75 percent cumulative, minus earlier installments.
- By March 15: the full 100 percent, minus earlier installments.
Missing a deadline triggers interest under Section 234C at 1 percent per month on the shortfall for that quarter. First-time OPC owners often trip here, because the rhythm is different from individual filing. Build these quarterly obligations into cash-flow planning from the start.