Question about tax deduction from the director of a One-person company (OPC)

It could be 25.16% depending on if you fulfill all the conditions for section 115BAA.

You need to show the reason for such withdrawal. You can't just take the money. You need to either show it as remuneration to director and then it would be deducted from your company profit and you need to pay tax on or show it as dividend and pay to director.

I think if you are not well versed with the law its always better to start with sole proprietor, it will also depend on type of business and it's not silly at all.

If you need to understand it one to one you can have a phone consultation.

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Thank you.

Firstly, there cannot be one person company. You need minimum 2 people, the other person may be namesake.  

Now for tax, company and individual are 2 different tax persons under income-tax law.  Hence, any withdrawal may not be really easy, there would be formalities.  Also, Company has otherwise many corporate law formalities to be done annaually. The tax rates for corporates have now reduced from 30%. 

Any withdrawal from the corporate will  need justification like what is the nature of payments. If its loan given to you, it need to be repaid back by you.  It may not be treated as income for you.  If its paid to you as salary or directors fees, there would be limits and justification to be given.  The company can claim deduction and it will be taxable for you.      

Apart from tax there are many other things to be mindful of before deciding the structure of business.  It also depends on what is the likely growth of business and intention to have a corporate setup.  

- In your case,income tax rate would be 25% for A.Y. 2020-21.

- Yes remuneration would be taxable in your hands as per individual slab rates. Your perception is wrong that it would be taxed again. Remuneration paid to you is an expense for the company.

Hello,

The applicable tax rate to the OPC would be 25% plus cess and surcharge as applicable. While for the Proprietorship it would be slab rates.

For the withdrawal of earnings from the company, it can be done through either director fees or remuneration to the director, both would be an expense for the company reducing the income chargeable to tax for the company and would be taxable in your hands under slab rates.

I hope this answer satisfies your requirements.

Regards,

CA Hunny Badlani

You can draw salary from the company. The TDS will be deducted on the salary and paid to you. When you file your return you will get credit of this TDS.

Dear Sir,

Hope you are doing well !!

-The applicable income tax rate would be 25% for A.Y. 2020-21.

- Yes, it would be taxable as individual slab rate.

Hello sir

as u r operating an OPC then u can withdraw expenses amount from OPC in the form of remuneration to director.

that remuneration will be treated as expense for ur OPC & will be taxed on ur hands as per your slab rate.

since u will start OPC now then u need to get it taxed at 25.16%
still if u want to opt for OPC then we can help u in incorporating the same at lowest cost. U can contact me through phone consultation 

Hi,

Assuming you have made a profit of INR 100, the taxation will work out as follows:

In case of OPC

1. OPC will pay tax of INR 22 (tax rate is 22% for companies excluding cess and surcharge.

2. when you will transfer remaining 78 rs. in your savings account as a dividend, you will have to pay tax on dividend as per your slab rate (which could be anywhere between 5% to 30% depending upon your total income)

In case of sole proprietorship 

1. You will pay tax of INR 30(assuming you fall within the slab rate of 30%)