New Delhi: In step with the needs of the Indian economy which is now the third largest in Asia, the government on Monday tabled a Bill to replace archaic income and wealth tax laws, a key reform that would widen the tax net, provide incentives to investors and increase revenues.

The Direct Tax Code Bill, introduced by Finance Minister Pranab Mukherjee in the Lok Sabha, was cleared by the cabinet on August 26. It will now go to a Parliamentary Committee for scrutiny, reports IANS.

The legislation is expected to be taken up for discussion when the Parliament reconvenes for the Winter Session in November.

Direct taxes are a major resource provider to the government and had grown at an average rate of 24 per cent per annum in the past five years, trebling from Rs 132,771 crore in 2004-05 to about Rs 378,000 crore in the previous fiscal.

The share of such taxes has also increased from 4.1 per cent to 6.1 per cent of the gross domestic product (GDP), which was made possible by rationalisation of tax structure and improvement in administration that led to better tax compliance.

Realising the need that India has to modernise its direct tax laws, mainly its Income Tax Act which is now nearly 50 years old, the government through the Bill seeks to simply procedural laws and build a investor friendly atmosphere. It aims at phasing out multiple tax exemptions and deductions.

"To improve compliance further, tax laws need to be simple, stable and robust. Tax rates should remain moderate," Mukherjee had said earlier.

The new code is also expected to streamline tax rates and administration for foreign institutional investors, for whom India is a top destination.