Tds on royalty paid to government

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shivani ebitwar

41 Points Posted on 09 February 2022

I have one doubt

Whether TDS Is applicable on Royalty paid to governament for extraction of sand/murum.

I think since we are paying amount to government TDS Will be not required.

And also Rate of TDS as per sec 194J is 10% on royalty but in Case royalty paod in case of consideration against sale then TDS rate shall be 2 %.

I am confused on this which rate is applicable??

Replies (5)

Quick Summary

The discussion concerns TDS applicability on royalty paid to the government for extraction of sand or murum. While Section 194J covers royalty payments, participants noted that Section 196 exempts TDS deduction on payments made directly to the Government, creating clarity on non-deduction.

rama krishnan

5751 Points Posted on 09 February 2022

No tds liability when payment was made to government

shivani ebitwar

41 Points Posted on 10 February 2022

But the perso with whom we are dealing is demanding for tds deduction

what should I do..

rama krishnan

5751 Points Posted on 10 February 2022

Sorry sir, my bad, without referring the relevant section, I replied earlier... actually no exceptions have been carved out in section 194J in respect of royalty payments made to GOVERNMENT

shivani ebitwar

41 Points Posted on 23 February 2022

Yes sir there is no exception in 194 J for payment to the government but as per sec 196 of income tax there is no need to deduct in case of payment made to government...

Aashok Kumar Sharma

Finance/Compliance Consultant

77925 Points Posted on 06 November 2026

No TDS. Sec 196 overrides 194J:

• Sec 196: no tax is to be deducted on any sum payable to the Government, the RBI, or certain notified corporations and funds. Mining or mineral royalty paid to the State Government (Department of Mines & Geology) is a sum payable to the Government, so no TDS under 194J, even though 194J covers royalty.

• If the person collecting the royalty is a private lessee or contractor (e.g. you pay royalty to a private quarry owner or sub-lessee), TDS under 194J (10% royalty) applies, since that payee is not the Government.

• TCS check: royalty-linked payments may come under Sec 206C(1) TCS on "mining and quarrying" (2%), for a contractor or licensee granted a right by a person other than the Government. Not when paid directly to the Government.

• GST: royalty paid to the Government for mining rights is taxable under RCM at 18% (Entry 5, Notf 13/2017-CT(R)). The SC in Mineral Area Development Authority (2024) held that royalty is not a tax, so GST applies. Check the State-specific exemptions and the GST Council's decisions on the retrospective period.