The finance ministry appears to be favourably inclined toward moderating income tax rates in view of the over 40 per cent growth in direct tax collections.

"With improvement in voluntary tax compliance and tax administration, direct tax collections are growing by around 45 per cent. For voluntary compliance, we cannot have marginal tax rate that is too high," Parthasarthy Shome, advisor to Finance Minister P Chidambaram, said at a conference in New Delhi.

Direct tax collections grew 44.86 per cent during April-November this year to Rs 1,45,053 crore (Rs 1,450.53 billion).

Shome said income tax rates in India were comparable to those at international level and other countries in the region. However, if voluntary compliance increased, the whole structure needed to be looked at, he said.

Referring to Brazil where third party information on taxpayers' expenditure is provided through more than 40 sources, he said eventually Indian government would have to increase the number of Annual Information Returns (AIR) sources from the present level of seven. The government gets this information from banks and other sources on high expenditure by taxpayers in seven categories.

Sources said the finance ministry is getting representations from political parties and industry chambers to review personal income tax rates, which vary from 10 per cent to 30 per cent in addition to the 3 per cent education cess and 10 per cent surcharge on income tax for income above Rs 10 lakh (Rs 1 million).

Chidambaram had earlier said that with improvement in voluntary compliance, he may revise tax rates.

The United Progressive Alliance partners are putting pressure on the finance minister to give some relief to tax payers, especially in the election year.

Shome said, "The New Income Tax code proposes to simplify the main Income Tax Law as well as simplify the overall structure of the Income Tax. It will be a model Income Tax code."

Chidambaram has earlier said that income tax code could be put on Web site for public comments by December end.