In a bid to boost domestic demand, China may allow taxpayers to retain more of their income.
The state council has proposed to hike the minimum taxable income from the current 2000 Yuan per month level (£186, $304). The council however, did not give out the amount of hike it proposed to implement.
Beijing is being seen as struggling to increase the domestic consumption to match its growth in exports sector.
The People’s Republic of China’s legislature, the Standing Committee of the National People’s Congress needs to approve the proposed changes before they can be implemented.
The higher disposable income will put more money in people’s pocket and will boost demand, but may also stoke inflation due to scarcity of resources, analysts point out.
China has been fighting rising prices with the central bank raising interest rates to reign in inflation. Inflation for January was recorded at 4.9% on an annualized basis.