Recently, income tax department has sealed accounts of several third party intermediaries (TPAs) for non-payment of tax deducted at source (TDS). That can come heavily to many health insurance policyholders in getting cashless hospitalization.

TPAs are inte¬rm¬ediar¬ies between the ins¬ured, ho¬spital and the insu¬rance fi¬rm. It’s the TPAs who pay¬ hospital to facilitate hospitali¬sation of the insu¬red allocated to them by insurance firms. Now, these firms won’t be able to render their services till the issue is settled.

The sealed accounts are Pa¬ramount Health Services, United Healthcare Services, Dedic¬ated Health Care Ser¬vices and Health India TPA, based on Mumbai.

According to the CB¬DT circulation, published on November 2009, under provision of IT Act 1961, payments made by TPAs to hospitals on behalf of insurance companies for set¬tling medical insurance cla¬ims under various sch¬emes including cashless cla¬ims are liable to 10 per cent TDS.

However, TPAs in Delhi, Karnataka and Chennai ha¬ve got a stay against the CBDT circular from the respective High Courts.

“Since our accounts have been sealed, it will put policyholders in a lot of inconvenience as we will not be able to reimburse hospitals the claims amount. From where will we pay the salaries of our employees? Even though we filed a Special Leave Petition in the Supreme Court some time back, the tax authorities did not wait for the Supreme Court judgment and sealed our accounts. In next three days, things will become clear as to what this (sealing accounts) means,” one TPA’s CEO told to media.

Another CEO of a TRA told, “CBDT in the circular had also said that if the TPAs get a certificate from the auditors of the hospitals that the relevant taxes and the interest due have been paid then it would amount to compliance of TDS. We were in the process of submitting these certificates but still the authorities sealed our accounts.”

“The issue is that the tax authorities want us to pay TDS retrospectively for the last six years which would be around Rs 1000 crore. This would put an end to cashless service for policyholders,” he added.