India has redrawn the rules governing mineral taxation.
The Mines and Minerals (Development and Regulation) Amendment Act, 2026 restricts how states can impose taxes, cesses and other levies on mineral rights and mineral-bearing lands.
The change comes two years after the Supreme Court’s landmark Mineral Area Development Authority (MADA) judgment. The Court recognised the power of states to tax mineral rights. It also made clear that Parliament can place limits on that power through a law relating to mineral development.
The 2026 amendment now uses that constitutional framework.
The law received presidential assent on August 17. The Ministry of Mines brought it into force on August 22 through a separate notification.
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For India’s mining industry, the change goes beyond taxation. It could alter the fiscal assumptions behind major mineral projects. It also shifts more control over the conditions governing state mineral levies towards the Union government.
Section 9D changes the taxation framework
The amendment inserts Section 9D into the MMDR Act.
The provision covers two areas:
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- Mineral rights
- Mineral-bearing lands
States cannot impose a tax, cess or other levy on either category based on mineral quantity, mineral value, royalty or another measure. They can do so only in accordance with conditions or restrictions prescribed by the Central Government.
The distinction between the two categories matters.
The Supreme Court’s MADA judgment treated taxes on mineral rights and taxes on land as separate constitutional fields. Entry 50 of the State List deals with taxes on mineral rights. Entry 49 deals with taxes on land and buildings. The Court held that Parliament can limit state taxation of mineral rights through a law relating to mineral development. It did not extend that limitation to the state’s general power to tax land.
The 2026 amendment now expressly brings mineral-bearing lands into the MMDR framework.
Section 9D also affects earlier claims
The amendment has a significant retrospective element.
A state levy on mineral rights or mineral-bearing land is deemed invalid if the amount had not been deposited with or recovered by the state before the amendment came into force.
The provision applies notwithstanding other laws or court judgments.
However, money that states had already collected or recovered before commencement does not have to be refunded.
This provision is important because of the financial consequences of the MADA ruling.
It does not simply establish a new tax regime for future mining projects. It also affects certain outstanding state claims that remained unrecovered when Section 9D took effect.
What the Supreme Court actually ruled
The 2024 MADA judgment is central to understanding the amendment.
In July 2024, a nine-judge Constitution Bench held that state legislatures have the power to tax mineral rights.
The Court also held that royalty is not a tax. Royalty is the consideration paid for the enjoyment of mineral rights under a mining lease.
The judgment, however, did not give states an unrestricted taxing power.
The Constitution’s Entry 50 of the State List says that state taxation of mineral rights is subject to limitations imposed by Parliament through a law relating to mineral development.
The Court explained that those limitations can include restrictions, conditions and even prohibition.
That point is crucial.
The 2026 amendment is therefore not simply Parliament overturning the Supreme Court. The Court had already recognised Parliament’s constitutional ability to limit state taxation of mineral rights.
The new law now exercises that power through the MMDR Act.
Why the change matters to mining companies
Mining projects depend on long-term financial assumptions.
Companies must estimate capital costs, operating expenses, royalties, taxes, infrastructure costs and other government charges before committing large sums of money.
Additional state-level mineral levies can change those calculations.
The government argues that the new framework will create greater certainty for mining companies. The Ministry of Mines says states currently receive around 90% of mining-sector revenue. It also says states collect multiple taxes, charges, fees and other payments linked to mining.
The government has also pointed to taxes on mineral-bearing land imposed by some states. In certain cases, it says these levies can reach 20%.
The policy objective is therefore not to remove all mining revenue from states.
Instead, the Centre is seeking greater uniformity in the fiscal framework for major minerals.
For mining companies, that could make long-term project modelling easier.
The eventual impact, however, will depend on the conditions that the Central Government prescribes under Section 9D.
States retain important mining responsibilities
The amendment does not transfer every aspect of mineral governance to the Centre.
States remain central to the mining system.
They administer many aspects of mining activity within their territories. They also continue to receive major streams of mining-related revenue.
The Ministry says states will continue to receive royalty, auction premiums, District Mineral Foundation payments, GST and other revenue associated with mining.
The government has also clarified that the amendment does not remove state taxation powers over minor minerals.
That distinction matters because the new Section 9D is aimed at mineral rights and mineral-bearing lands within the MMDR framework.
The dispute is therefore not about the complete transfer of mining powers from states to the Centre.
It is about how far states can use their taxing powers over major mineral resources and who sets the limits.
The federalism question is now sharper
That question has already triggered political opposition in mineral-rich states.
In Odisha, the Biju Janata Dal has demanded the withdrawal of the amendment. The party submitted a memorandum to the state governor on September 9, arguing against the new law.
The political disagreement reflects a larger fiscal issue.
Mineral-rich states bear many of the local costs associated with mining. They also depend on mineral revenue to support public spending and development.
The Centre, meanwhile, is seeking a more uniform framework for an industry that supplies raw materials to the entire national economy.
The 2026 amendment therefore raises a question that goes beyond tax rates:
How much room should states have to tax mineral wealth when Parliament is pursuing a national mineral-development strategy?
The MADA judgment recognised state taxation powers. Section 9D now places a new statutory boundary around their exercise.
Critical minerals raise the stakes
The timing is especially important for India’s critical-minerals strategy.
The National Critical Mineral Mission (NCMM) was approved in January 2025. It carries a government expenditure allocation of ₹16,300 crore and expects another ₹18,000 crore in investment from public-sector companies and other stakeholders.
The mission covers the critical-mineral value chain.
Its objectives include exploration, mining, beneficiation, processing and recycling. India is also pursuing overseas mineral assets and partnerships to strengthen supply security.
That strategy requires more than discoveries.
India needs projects that can move from exploration into mine development, production and processing.
Fiscal predictability can influence those investment decisions.
A critical-mineral project may require years of exploration and development before it generates commercial output. Changes in taxes and levies during that period can affect project economics.
Section 9D addresses one part of that risk.
It does not remove geological, infrastructure, permitting or processing risks.
The Centre’s role in critical minerals is already growing
The 2026 amendment fits into a broader shift in India’s mineral policy.
The government has already increased its role in critical-mineral exploration and auctions.
Earlier amendments to the MMDR Act gave the Centre greater authority over the auction of mining leases and composite licences for specified critical and strategic minerals.
The National Critical Mineral Mission has added another layer of Central support for exploration, processing and recycling.
Section 9D extends that centralising trend into mineral taxation.
The result is a mining policy framework in which the Union government is taking a stronger role in strategic minerals while states remain essential to mine development and local administration.
The real test will be investment
The 2026 amendment changes the fiscal framework.
Its success will depend on what happens next.
For existing mines, companies and states will need clarity on outstanding mineral-related levies and the application of Section 9D.
For new projects, investors will watch the conditions that the Centre prescribes.
For critical minerals, the test will be even broader.
India needs to turn exploration success into producing mines and processing capacity. A predictable tax regime can help, but it cannot solve every barrier to mine development.
Geology still determines whether a resource can support a mine.
Infrastructure affects project costs.
Processing technology determines whether some critical minerals can be recovered economically.
Permitting and land access can influence development timelines.
Capital availability ultimately determines whether projects move ahead.
The MMDR Amendment Act 2026 therefore should not be viewed simply as a mining-tax measure.
It is another step towards a more centrally coordinated mineral policy.
The immediate question is how Section 9D will operate in practice.
The larger question is whether India can use greater fiscal uniformity to accelerate mine development without weakening the role of mineral-rich states.
For India’s critical-mineral ambitions, that balance may prove as important as the tax itself.
