China's parliament has moved to reduce the widening gap between the country's rich and poor by approving legislation to raise the income tax threshold.
Workers have flooded into the cities to find work and a good wage
The National People's Congress hopes the move will significantly increase the number of people who will not have to pay the tax.
It comes two weeks after the ruling Communist Party passed a new five-year plan to reduce economic disparity.
The government has warned that the growing gap threatened social unrest.
Wage disparity is most evident between China's economically booming eastern cities and the significantly poorer rural areas.
Rural areas are being left behind by growing urban affluence
Annual incomes in cities such as Beijing and Shanghai now average more than $1,000 (£560) per person, while rural incomes have remained at about $370.
This has led to a growing number of popular protests in rural areas, and significant population movements into the cities.
From next year citizens will not have to pay income tax if they earn less than 1,600 yuan ($200; £112) a month.
Previously only those earning less than 800 yuan a month were exempt.
Officials said local authorities would not be allowed to alter the arrangement.
Lou Jiwei, head of the State Council Financial and Banking Office, said some people had hoped the new cut-off level would have been even higher, but that this was not possible.
"If we did that, the fiscal revenue would fall too far," he said.
China's Five-Year Plan for National Economy and Social Development is expected to put greater emphasis on improving social services rather than the fast-growth model that Beijing has emphasised in the past.
President Hu Jintao has himself admitted that China needs to build a "more balanced and harmonious society".