Identify the business right before collecting 2%
For tax year 2026–27, section 394(1), Table entry 9, of the Income-tax Act, 2025 prescribes 2% TCS for covered use of a parking lot, toll plaza, mine or quarry for business, excluding mining and quarrying of mineral oil, including petroleum and natural gas. The collector is the licensor or lessor. This is a rights-contract test, not a direction to collect income-tax TCS from every motorist paying a parking or toll charge. Read sections 394, 395 and 402 in the enacted Act as amended by Finance Act, 2026.
The framework below was checked on 25 October 2026. It addresses ordinary-rate collection for the stated tax year, with valid identification and no applicable overriding higher-rate provision. GST, royalty regulation, contract validity and final income-tax liability require their own analysis. Do not reuse a legacy section 206C label as a substitute for checking the current provision.
Both party definitions matter
Section 402(21) covers the person, other than a public sector company, receiving a lease, licence, contract or other whole or partial right in the specified facility for business. Section 402(22) defines the licensor or lessor as any person transferring such a right to another person other than a public sector company. The legal form of the receiving party therefore matters. A government association, a government-controlled entity and a statutory public sector company are not interchangeable descriptions.
Obtain the executed agreement, identity of both parties, facility description, commercial purpose and evidence for an exclusion. A licence and a lease may both be covered, so changing the document heading does not decide the tax result. A parking-space arrangement that does not meet the statutory rights description must be analysed on its actual terms rather than assumed to fall within entry 9.
Do not import another entry’s threshold or declaration
Entry 9 does not state a monetary collection threshold. The ₹10 lakh test for motor vehicles and the thresholds for remittances belong to different entries. Similarly, section 394(2)’s resident manufacturing or power-generation declaration relates to Table entries 1–5, not entry 9. An operator cannot simply submit a goods-use declaration to eliminate collection on its covered toll or parking rights.
The mineral-oil exclusion is specific. It does not remove every mine or quarry from entry 9, and it does not determine whether another tax obligation applies. Separate rights granted from a purchase of extracted goods; the latter transaction has its own classification and may involve another table entry.
Use the earlier debit or receipt, then prevent double collection
Section 394(1) fixes collection at the earlier of debiting the amount payable to the licensee’s or lessee’s account and receipt through cash or other modes. A collector should not wait for the final instalment where an earlier event has already triggered collection. Conversely, do not subject the same amount to collection again merely because an advance later appears within the invoice or contract-account debit.
Maintain a rights-contract ledger showing consideration, chronological debits, receipts, amounts already subjected to collection and the uncovered balance. The examples assume the legally relevant collection base has been established. They do not decide the treatment of separately charged GST, statutory recoveries, refundable security deposits or disputed contract adjustments. Establish those items from their legal and contractual substance before applying a percentage.
Lower-rate certificates require actual verification
Section 395(3) allows the buyer, licensee or lessee to apply to the Assessing Officer for lower collection. The collector follows the rate in a certificate issued under that provision during its validity. A pending application, a loss forecast or an operator’s request is not an issued certificate. Match the certificate’s person, period, transaction scope and rate before departing from the ordinary 2%.
Common errors are collecting on ordinary parking receipts without analysing the rights arrangement, assuming a small-contract exemption, excluding every mine, importing the manufacturing declaration or counting advances twice. A useful closing control reconciles the rights ledger to the TCS ledger and the applicable deposit, statement and certificate records.
Six worked illustrations
All facts and amounts below are fictional. Assumptions describe the model, not additional statutory rules.
Illustrative example 1: Monthly rights consideration
Assume a covered parking-business rights contract, an ordinary non-excluded operator and an established monthly base of ₹3,00,000. TCS is ₹3,00,000 × 2% = ₹6,000. This does not decide GST on the arrangement or final tax payable by the operator.
Illustrative example 2: Small covered amount
An otherwise covered rights payment has an established base of ₹1,000. Ordinary collection is ₹20. Entry 9 does not supply a minimum-amount exclusion simply because this payment is small.
Illustrative example 3: Advance and later balance
A covered ₹10,00,000 contract has a ₹4,00,000 consideration advance received before the remaining amount is debited. Collection attributable to the advance is ₹8,000; the uncovered ₹6,00,000 contributes ₹12,000. Total TCS is ₹20,000, not ₹28,000 from collecting again on the advance.
Illustrative example 4: Receiving PSU exclusion
Assume the recipient of ₹10,00,000 of stated rights is established to be a public sector company within the statutory exclusion. Entry 9 collection is ₹0. Without that exclusion, the ordinary model arithmetic would be ₹20,000; retain the evidence supporting the actual classification.
Illustrative example 5: Mineral-oil carve-out
Assume ₹12,00,000 relates solely to rights for mining petroleum, satisfying the mineral-oil exclusion. Entry 9 TCS is ₹0; the ordinary 2% arithmetic of ₹24,000 is not applied under this entry. Other tax obligations remain a separate question.
Illustrative example 6: Credit earlier collection
For a verified ₹5,00,000 covered base, ordinary total TCS is ₹10,000. If ₹3,000 has already been correctly collected against part of that same base, the remaining collection is ₹7,000. Match the prior amount to this contract before using it as a credit.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Fix the tax year | Transaction dates and current Act provisions. |
| 2 | Identify the rights | Executed contract, facility and commercial use. |
| 3 | Verify the parties | Licensor/lessor and licensee/lessee legal identities. |
| 4 | Examine exclusions | Public sector company evidence and mineral-oil facts. |
| 5 | Distinguish goods sales | Separate extracted-goods invoices from rights consideration. |
| 6 | Establish the collection base | Contract value, adjustments and separately analysed recoveries or deposits. |
| 7 | Map the trigger | Chronological debit and receipt events. |
| 8 | Verify any lower rate | Issued certificate, validity, person, scope and rate. |
| 9 | Reconcile prior collection | Advance allocation and uncovered balance. |
| 10 | Close period compliance | TCS ledger, deposit, statement and certificate reconciliation. |
Sixteen practitioner FAQs
1. Is the ordinary entry 9 rate 2%?
Yes, for a covered transaction under the stated current framework, subject to applicable overriding provisions.
2. Does every parking customer pay this TCS?
No. Analyse the grant of the statutory business right; ordinary end-user payment is not automatically that transaction.
3. Must the agreement be called a lease?
No. The definitions also encompass licences, contracts and other relevant transfers of rights.
4. Are partial rights relevant?
Yes. The party definitions cover rights or interests transferred wholly or partly.
5. Is there a ₹10 lakh threshold here?
Entry 9 does not state that threshold. The vehicle entry is different.
6. Are tiny covered payments automatically excluded?
No monetary floor is stated in this entry.
7. Is every government-linked recipient excluded?
Establish the statutory public-sector-company status rather than relying on a general government connection.
8. Does the mineral-oil exception exclude all mining?
No. Read the specified petroleum and natural-gas-inclusive carve-out precisely.
9. Is a goods purchase the same as a mining-rights contract?
No. Classify the transaction and applicable table entry separately.
10. Can the manufacturing declaration eliminate this collection?
Section 394(2) applies to entries 1–5, not entry 9.
11. Does collection wait until final cash settlement?
No. Apply the earlier debit-or-receipt trigger in section 394(1).
12. Can a consideration advance trigger collection?
Yes. Link it to the later debit so the same consideration is not counted twice.
13. Are all security deposits consideration?
Do not assume that. Examine refundability, appropriation and contractual substance.
14. Can a pending lower-rate application be used?
No. Verify the actual issued certificate under section 395(3).
15. Do these examples decide every GST-inclusive base issue?
No. They assume an established legally applicable collection base.
16. What is the strongest routine control?
A contract-wise bridge of debits, receipts, earlier collection, certificate use and remaining collection.
Conclusion
Section 394(1), Table entry 9, requires ordinary 2% TCS on covered business rights in parking lots, toll plazas, mines and quarries. Identify the rights contract, public-sector-company exclusion and mineral-oil exception, then reconcile the earlier debit or receipt without duplicating advances.