(E) Matter referred by Siddharth Hospitals Pvt. Ltd: Siddharth Hospitals Pvt. Ltd has recently been accorded recognition by several insurance companies to admit and treat patients in the hospital on cashless hospitalizat

This issue has been clarified by the CBDT vide Circular No. 8/2009 dated 24.11.2009. As per provisions of section 194J (1) of the Income tax Act, 1961, any person, who is responsible for paying to a resident any sum by way of fee for professional services, shall, at the time of credit of such sum to the account of the payee or at the time of payment therefore in cash or by issue of a cheque or draft or by any mode, whichever is earlier, deduct an amount equal to 10% of such sum as TDS. Further, as per Explanation (a) to section 194J "professional services" includes services rendered by a person in the course of carrying on medical profession. The services rendered by hospitals to various patients are primarily medical services and therefore, the provisions of section 194J are applicable on payments made by TPAs to hospitals etc. Further for invoking provisions of section 194J, there is no stipulation that the professional services have to be necessarily rendered to the person who makes payment to hospital. Therefore, TPAs who are making payment on behalf of insurance companies to hospital for settlement of medical/ insurance claims etc. under various schemes including Cashless Schemes are liable to deduct tax at source under section 194J on all such payments made to hospitals etc. In view of the above, all such transactions between TPAs and hospitals would fall within the ambit of provisions of section 194J and tax at the rate of 10% out of the total amount so paid by TPAs is required to be deducted.