Eligibility and Declaration

• An OPC can declare and pay dividends out of its profits after providing for depreciation as per the Companies Act, 2013.
  
• Dividends can only be declared if there are sufficient accumulated profits or the current year’s profits.
  
• The declaration must be approved by the Board of Directors, even if there is only one director.
  
• Since the OPC has only one member, the entire dividend amount is payable to that member.
  
• The dividend must be declared in compliance with applicable corporate and accounting regulations.
  

Compliance and Governance

• The company must ensure that dividend payments do not violate provisions related to capital maintenance or financial health.
  
• Dividends cannot be paid out of borrowed funds or revaluation reserves.
  
• A Board resolution must be passed and properly documented before payment is made.
  
• The dividend amount must be transferred to a separate bank account within the stipulated timeline.
  
• A clear record of dividend declaration and payment must be maintained in the company registers.
  

Timing and Distribution

• Once declared, the dividend must be paid within 30 days from the date of declaration.
  
• Delay or failure to pay within this period, without a valid reason, may attract penalties.
  
• Payment must be made through bank transfer or other traceable methods, not in cash.
  
• Since there is only one shareholder, distribution is straightforward and undivided.
  
• Proof of payment and acknowledgment should be retained for auditing and compliance purposes.
  

Tax Treatment of Dividends

• Dividends received by the sole member are taxable in their hands under the head “Income from Other Sources.”
  
• The company does not pay Dividend Distribution Tax (DDT) as it has been abolished.
  
• If the total dividend paid to a member exceeds ₹5,000 in a financial year, the OPC must deduct TDS at the applicable rate.
  
• TDS compliance includes depositing tax with the government and filing Form 26Q for quarterly TDS returns.
  
• A Form 16A (TDS certificate) must be issued to the member for income tax reporting.
  

Record-Keeping and Reporting

• The OPC must update its Register of Members and Register of Dividends to reflect the transaction.
  
• Dividend details must be disclosed in the company’s financial statements and annual filings.
  
• Auditors verify dividend declarations and ensure compliance with legal provisions.
  
• If any amount remains unpaid or unclaimed, it must be reported and transferred to the Investor Education and Protection Fund (IEPF), though unlikely in the OPC context.
  
• Accurate reporting strengthens financial transparency and regulatory trust.