Flat Corporate Tax Rate

• OPCs enjoy the benefit of being taxed at a flat corporate tax rate, unlike individuals who are taxed under slab rates.
  
• Under the new tax regime (Section 115BAA), OPCs are taxed at 22% plus applicable surcharge and cess.
  
• This rate is lower than the highest individual tax slab, making it attractive for high-earning solo entrepreneurs.
  
• The consistency in tax rate allows for predictable tax planning.
  
• No alternative minimum tax (AMT) applies under the new regime if opted for.
  

Deductible Business Expenses

• OPCs can claim a wide range of business-related expenses as deductions from taxable income.
  
• These include rent, salaries, electricity, internet, advertising, travel, depreciation, and professional services.
  
• Properly documented expenses reduce the overall taxable profit of the company.
  
• Even the remuneration paid to the director (if reasonable and approved) is tax-deductible.
  
• These deductions are not available in the same manner under individual or sole proprietorship taxation.
  

Depreciation and Capital Allowances

• OPCs can claim depreciation on fixed assets under the Income Tax Act.
  
• Higher depreciation rates are allowed for specific assets like computers and vehicles used for business.
  
• This reduces the book profit and consequently the tax liability.
  
• The company can also carry forward business losses and unabsorbed depreciation for up to 8 years.
  
• These carry-forward provisions support long-term tax efficiency and planning.
  

Tax-Free Remuneration Structure

• Dividends declared by the OPC (after payment of corporate tax) are taxed in the hands of the member under applicable slab rates.
  
• However, remuneration or salary paid to the director-member can be structured as salary, which may attract lower tax than dividends.
  
• This flexibility allows the member to optimize their total tax liability between corporate and personal levels.
  
• Employer contributions to PF and other allowances are also deductible for the company.
  

Avoidance of Double Taxation in Early Years

• In early years, when profits are low, OPCs can keep profit distribution minimal and reinvest income.
  
• As dividends are not taxed at the company level under current rules, this avoids double taxation.
  
• Tax is only paid when profits are distributed to the member as dividends or salary.
  
• This approach offers flexibility in managing working capital and tax payouts.