People earning less than 2,000 yuan ($258) a month will not have to pay income tax if the National People's Congress (NPC) Standing Committee approves the amendment to the Law on Individual Income Tax.
The draft amendment is likely to be adopted on Friday and take effect from March 1 next year, legislators said Sunday. The existing law requires individuals earning 1,600 yuan ($219) or more a month to pay income tax.
The draft amendment submitted to the country's top legislature Sunday is aimed at easing the burden of the low- and medium-income group, given the recent increase in prices of essentials.
Finance Minister Xie Xuren told the legislative session Sunday that the move would mean a 30-billion-yuan ($3.87 billion) cut in State revenue.
But the country has the financial capacity to withstand the reduction, he said, especially because it will "relieve the economic burden of medium- and low-income people".
China's consumer price index (CPI) climbed 6.9 percent in November, the fourth consecutive month that the CPI has stayed above 6 percent.
Ministry of Finance data show the basic monthly living cost, including food, clothing, accommodation and transport, of an average urban salary earner this year is 1,586 yuan ($217). And that amount is likely to reach 1,745 yuan ($239) a month next year.
But, according to the National Statistics Bureau, the per capita disposable income of urban residents was 1,150 yuan ($157) a month from January to September this year.
"The price hikes have increased families' burden, and hence the need to adjust individual income tax again," Xie said. The income tax cutoff point was raised from 800 yuan ($110) to 1,600 yuan ($219) a month last year.
The Ministry of Finance estimates the amendment will ease the burden of 70 percent income-tax payers. The raising of the threshold to 1,600 yuan had exempted 50 percent of the taxpayers.
The present amendment honors public demand, too, because 97 percent of the 3,698 people covered by a survey conducted by China Youth Daily in late October said the 1,600-yuan threshold was too low and should be raised.
Netizens' reaction on Sina.com, China's largest news portal, Sunday showed they were not happy with just a 400-yuan raise. The consensus among netizens from Beijing, and Guangdong and Hebei provinces was: The cutoff point should be at least 3,000 yuan ($411), given the soaring living expenses.