Section 206C(1C) of the Income Tax Act, 1961 mandates the collection of tax at source (TCS) by certain persons when they receive any amount as consideration for granting a lease, license, or contract relating to:
- 206CF – Parking Lot
- 206CG – Toll Plaza
- 206CH – Mining and Quarrying
Key Points to Note
- The obligation is on the lessor or licensor, not the lessee or licensee.
- The section covers only specified resources: parking lots, toll plazas, mines, and quarries.
- Tax must be collected at source at the time of crediting the payment or receiving the consideration, whichever is earlier.
Exclusions
Section 206C(1C) does not apply to:
- Transactions where the lessee or licensee is an employee of the lessor/licensor.
- Resources or activities not specified in the section.
Applicability under Section 206C(1C)
TCS is applicable when a person (the lessor, licensor, or grantor of the contract) grants to another person:
| Collection Codes under section 206C | Nature of Payment | Description and Analysis | TCS Rate |
| F | Parking Lot | Contracts for managing or operating vehicle parking areas. | 2% |
| G | Toll Plaza | Contracts to operate toll booths on highways. | 2% |
| H | Mining and Quarrying | Includes mining rights for sand, stone, granite, and other extractive minerals (excluding mineral oil). | 2% |
Other Points of Clarification
- Mineral Oil Excluded: TCS is not applicable under this section for petroleum and natural gas operations. These fall under other provisions or may be exempt based on CBDT clarifications.
- TDS vs TCS: In certain mining or toll contracts where both TDS and TCS could potentially apply (depending on the nature of payment), departmental circulars have clarified that TCS under Section 206C(1C) shall take precedence if the transaction fits the scope.
- Non-Residents: If the payer is a non-resident with no PAN or Aadhaar, TCS shall apply at higher rates (5%).
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In a commercial building where an association is managing and controlling the whole commercial building. The association is charging a fixed amount for providing parking lot to motor cars of the business entities which are being operated from such commercial building.
Whether payment to an association for providing parking lot is subject to tcs u/s 206CF of the act.
Based on our understanding, TCS under Section 206C(1C) applies when a parking space is leased or licensed for the purpose of rendering parking services. In such cases, the lessor or licensor is required to collect tax at source (TCS) from the lessee or licensee.
In your case, since the parking facility is being provided by the association to business entities who are not engaged in the business of operating parking services, the provision of TCS may not be applicable.
However, if the association itself has taken the parking space on lease or license for consideration from another party (i.e., the actual owner/lessor of the premises), then that lessor/licensor would be responsible for collecting TCS from the association at the time of granting the rights.