Prohibitions faced by an One person company (OPC)

An OPC also faces prohibition of carrying out any Non-Banking Financial Investments activities, converting a wholly owned subsidiary into an OPC and also issuing any kind of Employee Stock Scheme. The Companies Act, 2013 also frustrates the whole motive of the OPC by prohibiting a person to have more than one (1) OPC or become a nominee in more than one (1) OPC. This, to a large extent, defeats the whole purpose of the introduction as mentioned by the Committee Report.

Though the Government has been promoting major foreign investments in India, there are restrictions imposed on the foreign investors to incorporate an OPC, which has spread an air of despondency. The major disadvantage of an OPC is triggered from the tax perspective. The Income Tax Act, 1961 does not recognise the concept of an OPC and has placed it in the same slab as a private company under the bracket of 30% (plus surcharges) on total income. On the contrary, sole proprietors are taxed at the rate applicable to individuals.

Continue Reading: Everything you need to know about One Person Company (OPC)