Finance minister Yashwant Sinha has extended the Section 80HHC benefit under the Income-tax Act to exports of software which has brought the media and entertainment industry at par with the rest of the exporters who enjoy this benefit.

Sources said information and broadcasting minister Pramod Mahajan had taken the initiative and termed it as his first major achievement for the benefit of the media and entertainment industry.

The minister is believed to be working with the hope to push the country as a media super power of the next millennium. Mahajan is targeting to snatch the initiative from South Asian neighbours like Singapore and Hong Kong, so that the country becomes a major hub for investment, domestic as well as foreign in these sectors.

Currently, the value of media software exports from the country is estimatedto be approximately Rs 300 crore. With major sops in terms of income-tax exemption, media software exports is expected to go up to Rs 1,000 crore over the next two years.

According to media experts, this move should enhance the inflow of investment in bringing in state-of-the-art equipment into the country for setting up new studios and greater expenditure on promotional activities.Zee Telefilms Ltd senior vice-president PC Lahiri stated that the budget has also offered another major incentives for the industry - lowering of interest on export packing credit (EPC).

The reduction of interest rate on EPC would enable exporters to get loans at cheaper rates from banks which is very important for pushing the country's export income, Lahiri added.

He said that this is a significant step since the media sector was never offered any exemptions earlier.

The Budget, however, did not include the domestic film industry in the category similar to media software companies. The film industry has been demandingincome-tax exemption under 80HHC of the Income-tax Act for quite some time.

"The Indian film industry is one of the largest in terms of volumes and exemption of export income from income-tax would have encouraged the producers to push Indian films in away markets," experts said.

The I&B ministry is planning to come out with a comprehensive policy with regard to FDI in films. The ministry wants to put some restrictions on funds that foreign film companies raise for their operations in the country.The ministry wants foreign film companies to raise funds they require for their respective Indian chapters outside the country rather than from domestic financial institutions and banks.