The provisions relating to collection of tax at source on specified contracts such as toll plazas, parking lots, and mining activities have been restructured under the Income-tax Act, 2025. The earlier Section 206C(1C) of the Income-tax Act, 1961 is now covered under Section 394(1) [Table: Sl. No. 9], effective from 1st April, 2026.
This restructuring retains the requirement to collect tax at source on consideration received for granting rights or contracts in respect of specified activities while aligning the provision under the updated table-based framework of the new Act.
Quick Reference – Section Mapping & Reporting
- New Section (IT Act 2025): Section 394(1)
- Table Reference: Sl. No. 9
- Nature of Payment: Lease, licence or contract for parking lot, toll plaza, mining or quarrying
- Earlier Section (IT Act 1961): Section 206C(1C)
- Return Form: 27EQ
- Rate: 2%
Applicability of TCS under Section 206C(1C)
TCS is required to be collected on any amount received as consideration for granting a lease, license, or contract in respect of specified activities such as parking lots, toll plazas, and mining or quarrying. The responsibility to collect tax lies with the person granting such rights or contracts.
The provision applies to:
- Parking lot contracts
- Toll plaza contracts
- Mining and quarrying contracts
However, mineral oil, petroleum, and natural gas are specifically excluded from the scope of this section.
Who is Required to Collect TCS?
The obligation to collect TCS lies with the person granting the lease, licence, or contractual rights. Depending upon the nature of the arrangement, this may include:
- Central Government
- State Government
- Local Authorities
- Statutory Corporations
- Companies and Firms
- Other persons granting such operational rights
This ensures that entities deriving revenue from such commercial rights remain responsible for TCS compliance.
Time of Collection
Tax is required to be collected at the earlier of the following events:
- At the time of debiting the amount payable to the account of the licensee or contractor
- At the time of receipt of such amount
This ensures timely collection even in cases involving advance payments or deferred accounting treatment.
Rate of TCS
TCS shall be collected at the rate of 2% on the amount received or receivable for such contracts. The rate applies uniformly across all categories covered under this section.
Where PAN is not furnished, higher rate provisions may apply in accordance with the applicable provisions of the Act.
Scope and Coverage
The provision primarily covers consideration received for granting rights relating to specified infrastructure facilities and natural resource activities.
Covered activities include:
- Operation of parking lots
- Operation of toll plazas
- Sand mining
- Stone and granite quarrying
- Other mining and quarrying activities
The provision does not apply to mining and quarrying of mineral oil, including petroleum and natural gas.
Interaction with Other TDS/TCS Provisions
In certain situations, a transaction may appear to attract both TDS and TCS provisions depending upon the nature of the agreement. However, where the transaction specifically falls within the scope of Section 394(1) [Table: Sl. No. 9], TCS shall be collected accordingly.
Consequences of Non-Compliance
Failure to comply with TCS provisions may result in:
- Interest liability for delay in collection or deposit
- Penalties under applicable provisions
- Compliance notices from the Income-tax Department
- Other consequences prescribed under the Act
Timely collection, deposit, and reporting in Form 27EQ are therefore essential for proper compliance.
TCS Rates and New Code Mapping
| Code | Old Section | Nature of Payment | New Section (IT Act 2025) | Rate |
|---|---|---|---|---|
| 1090 | 206C – F | Use of parking lot for business purposes | 394(1) [Table: Sl. No. 9] | 2% |
| 1091 | 206C – G | Use of toll plaza for business purposes | 394(1) [Table: Sl. No. 9] | 2% |
| 1092 | 206C – H | Use of mine or quarry for business purposes | 394(1) [Table: Sl. No. 9] | 2% |
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