Converting a Private Limited Company into an OPC: Tax Filing Insights

In the dynamic landscape of Indian business, entrepreneurs often seek more flexible and manageable corporate structures. One increasingly popular transition is converting a Private Limited Company (Pvt Ltd) into a One Person Company (OPC). While this move brings operational simplicity, it also introduces specific compliance and tax filing requirements that need careful attention.

In this blog, we’ll walk you through the key aspects of tax filing when a Private Limited Company transitions into an OPC.

What is an OPC?

A One Person Company (OPC) is a type of business entity introduced under the Companies Act, 2013. It allows a single entrepreneur to operate as a company with limited liability, providing the benefit of corporate structure without the complexities of a private limited company. OPCs are ideal for solo founders or small businesses that want legal recognition without the need for multiple shareholders.

Conversion from Private Limited to OPC – Legal Snapshot

Under Section 18 of the Companies Act, 2013, and Rule 7 of the Companies (Incorporation) Rules, 2014, a Private Limited Company can be converted into an OPC, provided:

• It has paid-up capital of ₹50 lakhs or less.

• Its average annual turnover is ₹2 crores or less in the last three financial years.

After obtaining necessary approvals and completing ROC formalities, the company is legally recognized as an OPC.

Tax Filing for an OPC: What’s Different?

1. Income Tax Compliance

• OPC is taxed at a flat rate of 25% (for turnover ≤ ₹400 crores).

• OPCs are treated as separate legal entities under the Income Tax Act, 1961.

• Annual income tax returns must be filed using Form ITR-6.

• Tax audit is mandatory if turnover exceeds the prescribed threshold (currently ₹1 crore for businesses).

2. ROC Compliance

• Despite being a one-person entity, an OPC must comply with Companies Act annual filings:

  • Form AOC-4: Filing of Financial Statements

  • Form MGT-7A: Filing of Annual Return (simplified for OPCs)

• Due dates for these filings typically fall within 180 days from the financial year-end.

3. GST Returns (if applicable)

• If the OPC is registered under GST, monthly/quarterly and annual GST returns are mandatory.

• Filing GSTR-1, GSTR-3B, and GSTR-9 (if applicable) continues post conversion.

4. Other Taxes

• TDS Returns (if applicable): Filing of quarterly TDS returns is mandatory if the OPC deducts TDS.

• Professional Tax, PF, ESI, etc., may also be applicable based on employee count and state-specific regulations.

Key Points to Remember After Conversion

• Inform all stakeholders and vendors about the change in the company structure.

• Update PAN, TAN, and bank accounts with the new OPC details.

• Ensure timely filing of closure documents for the Pvt Ltd company and opening filings for the OPC to avoid penalties.

• Maintain proper books of accounts and statutory registers even as an OPC.

Final Thoughts

Transitioning from a Private Limited Company to an OPC can simplify management and compliance for solo entrepreneurs. However, tax filing and statutory obligations remain critical and must be adhered to diligently.

To ensure a smooth transition and accurate tax filing, it’s recommended to consult with a chartered accountant or legal advisor who understands both company law and taxation intricacies.

By staying compliant, your OPC can not only avoid legal troubles but also build a strong, credible foundation for future growth.