The concession was formerly restricted to companies with taxable income of less than 100,000 yuan.
Last year, China logged economic growth of 7.4 percent, its worst in 24 years, dragged down by a sagging housing market and a slowdown across sectors from exports to investment and manufacturing.
Many analysts expect growth in the world's second-largest economy to fall still further this year, to around 7 percent.
The economy still faces downward pressure and needs more "active fiscal policy" to keep growth in a reasonable range, the cabinet said.
To cut firms' costs and spur employment, an unemployment insurance fee paid by employers will be cut to three percent from two percent of workers' wages, saving companies more than 40 billion yuan a year, the cabinet said.
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