Arun Jaitley announced OBC families earning up to 8 lakhs per year will not come under creamy layer.
The government on Wednesday raised the creamy layer ceiling by Rs 2 lakh as it announced setting up of a commission to work out sub-quotas within Other Backward Classes (OBCs) for a "more equitable distribution of reservation benefits".
At the same time, the government emphasised that there will be no review of reservation.
Union Finance Minister Arun Jaitley announced that OBC families earning up to Rs 8 lakh per annum will not be considered in the creamy layer. Earlier, this ceiling was Rs 6 lakh per annum.
"The proposal is that there will be sub-categorisation within the OBC list for the purposes of central government employment. In this connection, the National Commission for Backward Classes had given its recommendation in 2011," Mr Jaitley said while briefing the media after a Cabinet meeting.
He said the Parliamentary Standing Committee gave the same recommendation in in 2012-13. "After inter-ministerial consultations, it was accepted," he said.
The Minister said 11 states have already implemented the sub-categorisation for state level services. These are Andhra Pradesh, Telangana, Bihar, Jharkhand, Puducherry, Haryana, Karnataka, West Bengal, Maharashtra, Tamil Nadu and Jammu and Kashmir (for Jammu region only).
He said the commission will examine "the extent of inequitable distribution of benefits of reservation among caste or communities included in the broad category of OBCs with reference to the central list".
"With this, those in the broad category of OBCs who were till now devoid of benefits of reservation, will get the benefits. There will be more equitable distribution," he said.
On whether the government is going to review the reservation mechanism, Mr Jaitley said: "There is no such proposal... there will be no review."