The entity was incorporated for a project that has not started, or to hold something, or because the group wanted a presence ahead of the business. Nothing has happened in it. Nobody has looked at it in a year. Then a penalty notice arrives, and it is larger than anything the entity ever spent.
An Indian company with no revenue still files annual returns with the Registrar of Companies, still files an income tax return, and is still audited every year. There is no small-company exemption and no automatic dormancy. Formal dormant status exists under Section 455 and reduces the filing burden, but it must be applied for — and it does not remove the audit or the tax return.
Sitting on an India entity that has gone quiet? WhatsApp us with the incorporation date and we will tell you what is outstanding.
Quick Summary — Zero Revenue, What Still Applies
| Obligation | Active company | Dormant under Section 455 |
| Statutory audit | Required | Still required |
| Income tax return | Required | Still required, nil return |
| Annual ROC filings | AOC-4 and MGT-7 | MSC-3 instead |
| Board meetings | Required | Reduced, still required |
| Director KYC | Required | Still required |
| GST returns | If registered | If registered, nil returns |
| Statutory registers | Required | Still required |
Why Parents Expect Otherwise
In the UK a dormant company files dormant accounts and is exempt from audit. In much of the US a private company is never statutorily audited at all. Parents arrive with that expectation intact, and it holds until the first notice.
India works differently. Every company incorporated under the Companies Act is audited annually, regardless of size, turnover or activity. A company that has never issued an invoice is audited on the same basis as one turning over crores. The audit is smaller, not absent.
The same applies to the income tax return. The obligation to file attaches to the company existing, not to it earning. A nil return is still a return, and not filing it attracts its own consequences.
Formal Dormant Status Is a Thing You Apply For
Section 455 of the Companies Act, 2013 recognises a dormant company. It covers a company formed for a future project, or to hold an asset or intellectual property, with no significant accounting transaction — and an inactive company, meaning one that has carried on no business or made no significant accounting transaction over the last two financial years.
It is a status you obtain, not one you fall into. The company passes a special resolution, files it, then applies to the Registrar in Form MSC-1. If satisfied, the Registrar issues a certificate in Form MSC-2 and the company’s status changes on the register.
What it changes: the annual filing becomes a single return in Form MSC-3 within 30 days of the financial year end, in place of the usual AOC-4 and MGT-7. Board meeting requirements are reduced.
What it does not change: the accounts are still audited, the income tax return is still filed, statutory registers and the registered office are still maintained, and directors still complete their annual KYC.
Where Groups Get Caught
Assuming dormancy is automatic. Without an approved application the company remains active on the register and every ordinary filing continues to fall due. Most penalty situations start here.
Transacting while dormant. Any commercial income disqualifies the company from dormancy. Even modest activity — a small service invoice, investment income — is enough to break the status.
Leaving it dormant indefinitely. Dormancy is a holding position, not a permanent one. Where a company remains dormant for a long run of years the Registrar may move to strike it off the register.
Forgetting GST. If the entity holds a GST registration, nil returns are due whether or not there is activity. Late nil returns attract fees, and continued non-filing can lead to cancellation. If the registration is not needed, cancelling it deliberately is cleaner than leaving it dormant.
Assuming an LLP can do the same. Dormant status under Section 455 applies to companies. It is not available to an LLP.
Dormant, Wind Up, or Keep It Running
Three honest options, and the right one depends on your timeline.
Keep it active. Sensible where the business is genuinely about to start, or where activity is small but real. You carry the full annual compliance, which for a quiet entity is modest.
Apply for dormant status. Suits a company held for a defined future purpose over a couple of years. It reduces filings without removing audit or tax.
Close it. If there is no plan to use the entity, striking it off ends the obligations properly. Groups often avoid this because closure feels final, and then carry years of compliance on an entity they will never use.
The one option that is not available is doing nothing, which is what most quiet entities are actually doing.
If You Are Already Behind
Establish what has and has not been filed since incorporation, and get the outstanding audits done — the tax and ROC filings depend on them, so nothing else can be cleared first. Then file the backlog in order, and only then decide between dormancy, continuing or closing.
Late filing costs increase over time, so the backlog does not get cheaper by waiting. It also cannot be skipped by closing the entity, since the filings have to be current before a strike-off application is accepted.
Frequently Asked Questions
Our India company has never traded. Do we really need an audit? Yes. Every company registered under the Companies Act is audited annually, and there is no exemption for small or inactive companies. The audit is proportionately small, but it happens.
Is our company automatically dormant if nothing happens? No. Dormant status must be applied for through Form MSC-1 and granted by the Registrar. Until then the company is active and all normal filings continue to fall due.
Does dormant status stop the income tax return? No. Dormancy is a Companies Act status and creates no income tax exemption. A nil return is still due each year.
Can we invoice a small amount while dormant? Commercial income is a significant accounting transaction and disqualifies the company from dormancy. If you intend to trade, even lightly, dormant status is the wrong choice.
We have not filed for three years. What now? Reconstruct what is outstanding, complete the audits, and file in sequence. It is recoverable, and the cost grows the longer it sits.
Is it cheaper to close the company? Often, where there is no plan to use it. Closure requires filings to be current first, so the backlog has to be cleared either way.
Our entity has a GST registration but no activity. Do we file? Yes, nil returns are due while the registration is live. If you do not need it, cancelling the registration is usually cleaner than filing nil returns indefinitely.
References
- Companies Act, 2013 — Section 455, dormant companies, and Companies (Miscellaneous) Rules, 2014
- Companies Act, 2013 — annual audit, annual return and financial statement filing requirements
- Income Tax Act, 1961 — return filing obligation and consequences of default
- CGST Act, 2017 — return filing where registration subsists
⚠️ Forms, timelines and eligibility for dormant status change through amendment and notification, and your position depends on your entity type and filing history. Confirm with your advisor before applying for dormancy or assuming a filing does not apply.
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