In a key fiscal measure announced in Union Budget 2026, the government has increased the Tax Collected at Source (TCS) on coal and lignite to 2%. The move is aimed at improving tax compliance and widening the tax base in the mining and energy sectors.
Officials said the revised TCS rate will apply to transactions involving the sale of coal and lignite, impacting buyers across power generation, steel, cement and other coal-dependent industries. The government expects the higher TCS to strengthen revenue collection and enhance traceability of high-value mineral transactions.
Industry participants are assessing the impact of the increase on working capital requirements, particularly for sectors with high coal consumption. While the measure may lead to short-term liquidity pressures, policymakers maintain that it aligns with broader efforts to formalise mineral trade and improve transparency.
The change forms part of a series of tax and policy adjustments in Budget 2026 focused on resource mobilisation, energy security and better regulation of natural resources.