In a pointer to possible direct tax reforms in Budget 2008-09, advisor to the finance minister, Parthasarathi Shome, has said that the government might increase the number of high-value transactions that should be mandatorily reported and realign the income-tax structure.

Though Shome did not give details, he said the government was likely to increase the number of transactions that require reporting from seven to tighten scrutiny and check evasion.

He pointed out that Brazil covered 40 items under its annual information report system and so it was possible for India to do more as well.

With the current reporting system capturing saving-and investment-related transactions, government sources say consumption expenses like on branded jewellery, high-end home gadgets, cars and foreign travel may be added to the list.

"With proper billing of high-value consumption items, it is possible to capture such data," the source said.

Shome added the direct tax structure was also expected to come under scrutiny now that India's voluntary compliance levels matched global standards.

The direct tax collections have been growing at over 40 per cent for the last two years while the number of assesses filing returns increased from 23.42 million in 2003-04 to 27.54 million in 2006-07.

The total number of assesses increased from 30.17 million to 31.92 million during the period.

"We can't have a marginal rate of income-tax which is too high. The new income-tax code, which is likely to be floated shortly for consultation and discussion, will simplify income-tax laws and the overall structure," Shome said.

Income slabs and tax rates may also be realigned as Finance Minister P Chidambaram has already said that if compliance improves, he may take a re-look at the whole tax structure. It is not known if such a move will be part of the coming Budget or the new income-tax code.