Close on the heels of Rediffmail, which offers 1000 MB (1 gigabyte) storage space to all its free e-mail users, Microsoft too will increase the Hotmail inbox capacity to 250 MB from the current 2 MB. Google too offers e-mail space of 1 GB, while Yahoo offers 100 MB space.

The Hotmail offer will come into effect from July 2004.

Microsoft also plans to give paying customers for its Hotmail e-mail service 2 GB of storage and boost the size limits on free accounts. The new paid e-mail service called MSN Hotmail Plus will have the capability to send 20MB attachments and will cost $19.95 pre year.

Microsoft is also now cleaning viruses in infected outgoing or incoming e-mail messages. Earlier it scanned all outgoing and incoming Hotmail e-mail messages, but did not clean them.

Microsoft is providing this antivirus service in partnership with Network Associates' McAfee unit.