Taxi and bus fleet owners and contractors providing raw materials, electrical work and furniture in civil construction are likely to come under the presumptive income tax net from 2008-09.

An announcement in this regard is likely in the coming Budget.

Presumptive tax is a procedure for computing profits of contractors that supply labour for civil construction or are in the business of plying, hiring and leasing transport for goods.

A proposal is being considered to widen and deepen presumptive taxation to cover more activities under section 44AD and 44AE of the Income Tax Act, a finance ministry source said.

Section 44AE, for instance, covers goods carriages up to ten vehicles but excludes passenger vehicles. This provides scope for tax evasion since a large number of taxi and bus fleet operators provide transport services to hotels, tourists, government departments and corporations.

"The voluntary tax compliance level is poor in this segment," an official source said.

Under this section, a heavy goods vehicle is presumed to be making a profit of at least Rs 3,500 and other goods carriages Rs 3,150 per month and are taxed accordingly.

Similarly, 44AD covers only contractors engaged in civil construction or supply of labour for civil construction, whose annual income is up to Rs 40 lakh (Rs 4 million).

Under the section, at least 8 per cent of the contractor's gross receipts are considered as profit for taxation.

Officials said there is a need to widen its scope to include raw material suppliers for construction, sub-contractors providing electrical work, furniture, interior designing and office stationery.

Tax assessors have found that a large number of such assessees claim refunds for whatever they might have paid in taxes. Since there is no provision for mandatory audit of such assessees, they tend to show lower income.

Only 1 to 2 per cent of such assessees, whose returns are scrutinised, pay taxes properly, officials said. If they are included under presumptive taxation, income tax officers will be able to raise tax demands on such assessees.

Tax deducted at source may also be made mandatory for assesses who are to be brought under presumptive taxation.