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of <h1>TPAs Must Deduct Tax on Payments to Hospitals u/s 194J; Penalties for Non-Compliance Clarified.</h1> The circular addresses the applicability of Section 194J of the Income Tax Act, 1961, concerning payments by Third Party Administrators (TPAs) to hospitals for settling medical or insurance claims on behalf of insurance companies. It clarifies that TPAs must deduct tax at source on such payments, as these are deemed professional services. Failure to deduct or pay the tax makes TPAs liable as defaulters, subject to interest and penalties. The Board has decided not to initiate proceedings under Section 201 after six years from the financial year end if taxes are unpaid, provided the deductee has paid the relevant taxes. Compliance requires a certificate from the deductee's auditor.
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