Several health insurance policyholders may face problems in getting cashless hospitalisation as the income tax department has sealed accounts of several third party intermediaries (TPAs) for non-payment of tax deducted at source (TDS).

Industry officials say TPAs whose accounts have been sealed are Mumbai headquartered Pa­ramount Health Services, United Healthcare Services, Dedic­ated Health Care Ser­vices and Health India TPA.

Industry sources said sealing of accounts means that the TPA can not render its services till the issue is settled. TPAs are inte­rm­ediar­ies between the ins­ured, ho­spital and the insu­rance fi­rm and facilitate hospitali­sation of the insu­red by pay­ing the hospital from fu­nds allocated to them by insurance firms.

Last Friday, officials in Mumbai sealed the accounts of TPAs as they fa­iled to deduct TDS on the payments ma­de to hospitals for cashless treatment retr­ospectively sin­ce 2003. The Mumbai TP­As last month had losta case in Bo­mbay High Court relating to the CBDT’s decision, following which the tax department took the step to seal their accounts.

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

In November 2009, CB­DT had issued a circular saying that under provision of IT Act 1961 payments made by TPAs to hospitals on behalf of insurance companies for set­tling medical insurance cla­ims under various sch­emes including cashless cla­ims are liable to 10 per cent TDS.

A TPA's CEO told Financial Chronicle, “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 judgement and sealed our accounts. In next three days, things will become clear as to what this (sealing accounts) means.”

“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,” said the CEO of another TPA.

“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,” said the TPA official.