Lula signs exemption from Income Tax for those earning up to R$ 5,000

The project also creates an income tax deduction for taxpayers earning between R$ 5,000 and R$ 7,350 per month. The expansion of the exemption range will already be in effect as of January 2026. According to the Palácio do Planalto, about 15 million Brazilians will no longer pay income tax under the new law. Exempting those who earn up to R$ 5,000 a month was one of President Lula’s campaign promises. The proposal was presented by the government in March of this year and was approved in early November by the Federal Senate, unanimously. According to the government, in order to maintain fiscal balance and compensate for the reduction in revenue, there should be an increase in taxation for high incomes, starting at R$ 600,000 annually. The tax is gradual, with a maximum rate of up to 10% on earnings. Taxpayers who already pay this percentage, or more, will not have any changes. At the signing ceremony of the law that expands the income tax exemption range for those earning up to R$ 5,000 at the Palácio do Planalto, the Minister of Finance, Fernando Haddad, thanked the Presidents of the Chamber of Deputies, Hugo Motta, and the Federal Senate, Davi Alcolumbre, who were absent from the event. Haddad stated that they were ‘diligent’ in approving the text. ‘Without that, it would not be possible for it to be valid in 2026. It was imperative to approve the project in 2025. The country needs them very much. So that we can successfully conclude this year,’ he added.