New Delhi: Small and medium enterprises (SME) in the software export business may continue to enjoy income-tax benefits beyond the 2009, the year in which tax breaks available through the Software Technology Parks of India (STPI) scheme is due to lapse, reported The Economic Times. The Information Technology Ministry has given an indication to this effect. The concession to SME software exporters is to compensate them for rupee appreciation.

PMO is likely to ask the finance ministry to consider extending income tax sops to small and medium companies in the software exports. Telecom and IT minister A Raja had met Prime Minister Manmohan Singh in this regard. The PMO's intervention was sought when the finance ministry initially did not favor a proposal from the department of information technology (DIT) for retaining the tax breaks for STPI units beyond 2009.

Raja has apprised the Prime Minister about the losses that STPI units would face on expiry of the STPI scheme. Dr Singh's attention was also drawn to the fact that end to the tax sops may discourage investments and lead to brain drain yet again.

The extension, which the finance ministry would do by amending the sunset clause under the scheme, may be for a period of another three years.

"Big companies like Infosys and Wipro no longer need any promotional schemes to get ahead and this has been mentioned by many including N Narayanamurthy of Infosys. The smaller ones, however, need some support to come at par," a senior official in the DIT said. While big companies have been able to hedge against the 15 percent appreciation of the rupee against the greenback, SMEs have been hit hard.

Meanwhile, Nasscom had sought 10-year extension for the tax sops saying that domestic as well as multinational IT companies have started making investments in other countries fearing expiry of the STPI scheme.