1. Overview
- Introduced: Finance Act, 2004.
- Objective: Ensure tax compliance on income from leases/licenses for specified infrastructure and resource-related activities.
- Rate: 2%(reduced to 5% temporarily from 14.05.2020 to 31.03.2021).
2. Applicability
A. Transactions Covered
| ACTIVITY | DESCRIPTION | TCS TRIGGER |
| Parking Lot | Lease/license for vehicle parking areas (e.g., malls, airports) | Payment for lease/license |
| Toll Plaza | Contracts for highway/bridge toll collection | Toll revenue sharing or lease fees |
| Mining & Quarrying | Rights to extract minerals (e.g., coal, sand, stone) | Royalty or lease payments |
Exclusions:
- Mineral oil/petroleum/natural gas.
- Government/PSU lessees.
- Illegal mining(no TCS on fines/compounding fees).
B. Who Collects TCS?
- Collector: Lessor/licensor (e.g., toll operators, mining leaseholders).
- Exempt Entities: Central/State Governments, local authorities.
3. Key Compliance Requirements
- TCS Collection
- Timing: At the earlier of:
- Payment receipt (cash/cheque/digital).
- Credit to lessee’s account.
- PAN Mandate: Higher TCS (5%) if buyer lacks PAN.
- Deposits & Returns
| ACTION | DUE DATE |
| TCS Deposit | 7th of next month (e.g., August 7 for July collections) |
| Quarterly Return (Form 27EQ) | 15th of next month post-quarter-end |
| TCS Certificate (Form 27D) | 15 days after return filing |
Penalties:
- Late Payment: 1% monthly interest.
- Non-Filing: ₹200/day (max. TCS amount) + ₹10,000–₹1,00,000 penalty.
4. Judicial Interpretations
- Illegal Mining: No TCS on fines/compounding fees (Chhattisgarh HC, 2025).
- Tahbazari Fees: Excluded (not a “toll plaza” activity).
- Usable Minerals: Not “scrap” (Gujarat HC in Priya Blue Industries).
5. Practical Examples
- Toll Operator:
-
- Collects 2% TCSfrom a private firm leasing toll rights for ₹50 lakh.
- Deposits ₹1 lakh TCS by 7th of next month.
- Mining Leaseholder:
-
- Charges 2% TCSon ₹20 crore royalty from a quarry licensee.
- Issues Form 27Dby 30th May for Q4 filings.
6. Recent Updates
- Budget 2025: Proposed omission of Section 206AB (higher TCS for non-filers).
- E-filing Mandate: Digital payments/returns for corporates.
Key Takeaways
✔ Rate: 2% (1.5% during COVID relief).
✔ Exclusions: Mineral oil, government lessees, illegal mining fines.
✔ Compliance: PAN checks, monthly deposits, quarterly returns.
✔ Penalties: Interest + fines for delays.
Pro Tip: Use TRACES portal for seamless filings and mismatch resolution. For complex cases (e.g., cross-state leases), consult a tax advisor.
