New Delhi: The Government may extend the tax holiday for software exporters beyond March 2010, in the Budget tomorrow.

Analysts said extension of tax benefits will be a great relief to the IT sector, which is reeling under the impact of global financial crisis, which has resulted into fewer number of orders and sharp reduction in earnings.

Official sources said though the industry has asked for five years of tax exemption, the finance ministry may grant it for two years.

Currently software-exporting firms enjoy a tax holiday as their units are set up under the Software Technology Parks of India scheme, which entitles them to such a benefit.

Major software exporting firms like Wipro, TCS and Infosys earn a major chunk of their revenues from meltdown hit western markets.

Under the tax holiday scheme, firms in technology parks pay taxes only on the business they get from India and their export revenues are tax-exempt. Most of them get more than three-quarters of their revenue from exports.

Nasscom President Som Mittal said, “The tax break has to be extended not only to encourage SMEs and enable expansion into smaller towns but to also ensure that work does not shift outside India.”

IT minister A Raja had approached the Prime Minister and the finance minister for a two-year extension of tax concession available under the STPI scheme.