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I read that it increases shiny chance starting from level 5 but does it further increases the chance for each level?

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EDIT: My previous answer was incorrect

Apparently, yes your search level does increase your shiny chances. But the odds only increase until you have a search level of 40. After that, your odds will always be a 0.5% chance. Still very rare, but it'll be a lot easier to find them (though I personally prefer the Masuda Method cough)

Source: http://bulbapedia.bulbagarden.net/wiki/DexNav#Benefits

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Well it appears I am incorrect.  I apologize I'll fix up my answer and leave a source... though it seems odd that your shiny odds would stay increased despite not chaining. That loses the purpose of chaining :/
It has been fixed. Sorry again lol
Thanks!