IRDA seek exemption of Third Party Administrators (TPAs) from Tax Deducted at Source (TDS)
- Thursday, December 3, 2009, 1:26
- Income Tax
The Insurance Regulatory and Development Authority (IRDA) has asked the Income-Tax Department and the Central Board of Direct Taxes (CBDT) to consider exemption of Third Party Administrators (TPAs) from Tax Deducted at Source (TDS). According to a recent CBDT circular, the TPAs would have to deduct 10 per cent of the amount as tax when making payments to hospitals on behalf of patients.
“However, the purpose of introducing TPAs is to facilitate speedy cashless transactions in health insurance, thereby promoting policyholders interest. The new tax provision goes against this,” Mr J. Hari Narayan, Chairman, IRDA, told Business Line.
“Besides, it has been said that tax had to be paid with retrospective effect, which may not augur well for the industry,” the Chairman said.
The new provisions would apply retrospectively from 2003 to TPAs.
The regulator had formally written to the Tax Department and CBDT on the issue and was awaiting their response.
The argument against taxing TPAs is that they make payments to hospitals on behalf of health insurance policy holders. Given the current level of health insurance penetration, the tax burden could be Rs 100-120 crore , according to experts.
There are about 27 TPAs that have been given licences by IRDA, according to the Authority’s Web site.
On the growth of health insurance sector, Mr Hari Narayan said the general scenario is “satisfactory” and the complaints on claim refusals were not alarming.
Related posts:
- Income-tax department sent notices to six Mumbai-based third party administrators (TPAs) to Pay TDS for last two years
- TPAs may deduct tax from hospital bills paid for treatment of subscribers in cashless systems
- Cashless hospitalisation schemes offered by insurance companies comes under the income-tax net
- Notification on Applicability of TDS u/s. 194J of IT Act’ 1961 in the case of transactions by the TPAs with Hospitals etc
- CBDT will be consulted before changing insurance Form : IRDA
