While the income criteria had been Rs 4.5 lakh per annum, the Union Cabinet on Thursday increased it to Rs 6 lakh per annum.
The increase in the income limit to exclude the creamy layer is in keeping with the increase in the Consumer Price Index.
The creamy layer bars the affluent among Other Backward Classes from reservation benefit on the basis of family income.
Raising the bar to Rs 6 lakh would allow more OBCs to avail of the 27 per cent quota in jobs and education.
"It would enable more persons to take advantage of reservation benefits extended to OBCs in government services and admission to central educational institutions," a statement issued by the government said.
"This would bring about equity and greater inclusiveness in society. The Department of Personnel and Training and the Ministry of Human Resource Development would issue necessary orders to this effect," it said.
The limit for income was decided in 2008, according to which families with an annual income of Rs 4.5 lakh and above cannot be allowed the benefits.
According to the previous recommendation made by the OBC Commission, the ceiling was kept at Rs 12 lakh per annum for urban areas and Rs 9 lakh for rural areas.
Sources said this recommendation was not financially feasible as it would have reduced the number of people that comprise the creamy layer.
A Group of Ministers (GoM), set up to resolve the issue, has recommended a uniform ceiling of Rs 6 lakh per annum.