This paper analyses the income distribution effect of the direct payment program for paddy. To assess this effect, the Gini indices are calculated, using the data of Farm Household Economy Survey, under various policy scenarios. It is found that the program has a considerable income redistribution effect in favor of the lower income household. This effect is further strengthened when the payment per hectare is raised whereas it is weakened if the upper limit for the legitimate area is increased. If the possibility of 'transfer incidence' to the land owner is taken into account, the redistribution effect is considerably weakened. If the redistribution is an important policy consideration, it is desirable to design the policy in such a way to ensure that the ‘leakage’ to the land owner is kept low.