Finance minister Lou Jiwei said told a news conference that the ministry of finance has worked with the state administration of taxes and other government taxes to put together a reform plan, and has presented this to the state council, China News said.
The proposed new tax structure is not only based on income thresholds but also considers overall income, plus spending on housing, mortgages, children's education and elder care, Lou told the news conference.
Implementation of the law will be complicated and will be "promoted step by step", china News said.
Systems to track personal income and property information will be improved, and some laws will need to be amended before the tax reform can go ahead, Lou said, according to China News.
China raised the monthly tax exemption threshold from 2,000 yuan ($307) to 3,000 yuan in 2011, China News said.
The development of a workable and up to date tax-division system is a complicated task for all countries, including China, Lou said, according to a separate China News report.
The ministry of finance is also looking at value-added tax, local government tax and property tax, the report said.
"We are now working with relevant departments to make a law for the house property tax, and are working on the reform plan for the personal income tax, as well as the other local taxes," Lou said.
China does not yet have a local government tax system, nor a reliable revenue source for local authorities, Lou said. Most local authorities top up the money given to them by central government through fees and selling land, he said, according to China News.