Many issues confront the Finance Minister as he prepares his Budget proposals. Does the economy need more fiscal stimulus in the form of higher infrastructure spending? Should the excise duty cuts offered earlier to beat the economic slowdown be continued or rolled back? How much funds should be allocated to the UPA government's pet programmes for rural employment generation and food security? Above all, this year the FM needs walk the tightrope between providing a fillip to investment so that the economy returns to a high-growth trajectory while at the same time keeping a rein on the fiscal deficit.

Prior to the Budget, corporate houses, chambers of commerce, representatives of various industries and consumer groups all present their demands to the government. We spoke to a wide cross-section of experts to find out what they expect from the Budget and how these demands, if accepted, would affect your personal finances.

MFs: Treat fund of funds at par with equity funds

The mutual fund industry would like to see the tax treatment of fund of funds and global equity funds (i.e., mutual funds based in India that invest in foreign equities) changed. Says Lakshmi Iyer, head (fixed income), Kotak AMC: “The tax treatment of Indian fund of funds (FoF) and global equity funds, which are at present treated at par with debt funds, needs to change. They should be treated as equity funds, where the long-term capital gains tax is zero after a year.”

Life and general insurance: Lower service tax

The life insurance industry has a three-point agenda for the Budget:

Separate deduction limit. At present, investments made in life insurance policies qualify for tax deduction under Section 80C. However, a host of other instruments are also included under this section (mentioned earlier). And the maximum you can save with all these instruments combined is Rs 1 lakh. The insurance industry is seeking a sub-limit within this section exclusively for investments made in long-term insurance products, or an increase in the overall limits for Sections 80C and 80D.

"Investments made in instruments that have more than five years' tenure should be offered incentives,"says Kapil Mehta, chief executive officer, DLF Pramerica Life Insurance.

Exemption of tax on annuities. Currently annuities are treated as income and are taxable in the hands of investors. This deters people from using annuities to meet their post-retirement monthly income need. “Retirement planning is a must, so we seek exemption of tax on annuities,” says S B Mathur, secretary general, Life Insurance Council.

Lower service tax. "Service tax should be levied only on fund management charges; all other charges should be exempt from service tax,"says Rajesh Sud, chief executive officer, Max New York Life Insurance. A lower service tax would translate into lower premium.

Like life insurance, the general insurance industry too is seeking removal of service tax. "The growth of the insurance industry requires a waiver of the service tax, which currently stands at 10.3 per cent, including the education cess. Waiver of this charge will make micro-insurance products more affordable,"says N K Kedia, director marketing, Iffco Tokio General Insurance.

The industry is also looking at changes in limits that were prescribed years ago. "There is a need to increase the threshold for the levy of service tax on policies. The present notification exempts transactions involving premium of less than Rs 50 (except motor insurance) from service tax. This threshold limit, which was fixed in 1994, needs to be revised. Small transactions involving premium of up to Rs 1,000 should be exempt from service tax. This will benefit the under-privileged sections of our society," says Ajay Bimbhet, managing director, Royal Sundaram Insurance. He further adds: "Moreover, the government's Universal Health Insurance Scheme exempts PSU companies from service tax. This exemption on rural health insurance premiums should be made applicable to private players as well."

According to the General Insurance Council, an income tax exemption for householders' policies should be granted. "This will give a fillip to this sector and reduce the burden on the government in the event of catastrophes," says SL Mohan, secretary general, GIC.

Pension: Parity for NPS, the new kid on the block

The interim regulator for the New Pension System, Pension Fund Regulatory and Development Authority (PFRDA), is seeking clarity on taxation issues. At present, contributions made to NPS by the self-employed do not qualify for tax concessions. The regulator is also seeking a level-playing field for NPS vis-à-vis other retirement products. "Long-term saving products by the government like the EPF, PPF and GPF are all exempt from tax at all stages ” contribution, investment and disbursement. But NPS and other retirement policies by life insurance companies are taxed at withdrawal. I am only requesting for a level-playing field,"says D Swarup, chairman, PFRDA.

With so many demands jostling for his attention, the FM will have to weigh each on its merit. Often, a short-term loss of revenue to the exchequer is justified if it spurs a medium- or long-term growth of the sector (which translates into higher revenues for the government). Get ready for the drama and the excitement of B-Day and watch how many of these proposals pass muster.