The Government has decided that people earning up to the minimum wage of €17,540 per year will be exempt from the 1% income levy announced in the Budget.
However, anyone earning above this level will be charged the levy on the full amount of their income.
The Government estimates that the cost of the exemption will be around €60m.
However, a spokesperson said that amount would be made up from the levy, implying that the point at which the higher rate of 2% applies, currently €100,000, may be lowered.
Full details will be contained in the Finance Bill to be published next month.
Last week's proposal for a 1% levy on all income has been heavily criticised by trade unions, who want the low paid excluded from the measure.
After meeting the Irish Congress of Trade Unions on Friday, the Taoiseach said the Cabinet would be considering the issue.
Finance Minister Brian Lenihan had indicated the implementation of the levy could be looked at in the Finance Bill.
The Taoiseach has also told the Dáil that he will be announcing a public service reform package in the coming weeks.
He said a special provision will not be made to meet pay increases.
