Income Tax in Malaysia for Beginners: Who Pays and How Brackets Work

If you earn income in Malaysia, the Inland Revenue Board (LHDN) may require you to pay income tax, and the amount depends on how much you earn after approved deductions, not on your gross salary. Malaysia uses a progressive system: the more you earn, the higher the rate on the portion in each band, but you never lose money by moving into a higher bracket.

Who has to pay income tax in Malaysia?

You are liable for Malaysian income tax if you are a tax resident and your annual chargeable income exceeds RM5,000 (the first bracket above zero). In practice, once you account for the automatic individual relief of RM9,000, most salaried employees only start paying tax when their annual employment income exceeds roughly RM37,333 (around RM3,111 per month). Married individuals with two children typically cross the threshold closer to RM52,000 per year.

Income sources that are taxable include employment salary, bonuses and commissions, business or professional income, rental income, and director fees. Interest income from bank deposits and dividends from Malaysian companies are generally exempt.

Resident vs non-resident: why it matters so much

Your residency status for tax purposes is determined each year, not by passport, but by the number of days you are physically present in Malaysia during that calendar year.

Tax residents are those who are present in Malaysia for 182 days or more in a given year. Residents benefit from the progressive bracket system, are eligible for all personal reliefs and rebates, and pay rates starting from 0%.

Non-residents are present for fewer than 182 days. They pay a flat rate of 30% on employment, business, dividend, and rental income, with no entitlement to any personal reliefs or rebates. The only common exemption is employment lasting fewer than 60 consecutive days in Malaysia.

There is also a “linked period” rule: if you have fewer than 182 days in the current year but those days are part of a continuous stretch of 182 or more days that overlaps into the preceding or following year, you may still qualify as a resident.

Feature	Tax Resident	Non-Resident
Presence required	182+ days in the year	Under 182 days
Tax system	Progressive 0% to 30%	Flat 30%
Personal reliefs	Eligible	Not eligible
Tax rebates	Eligible (if income below RM35,000)	Not eligible
Form to file	Form BE or Form B	Form M

What is chargeable income?

Chargeable income is the figure your tax is actually calculated on. It is not your gross salary.

The formula is:

Chargeable Income = Total Income from all sources, minus allowable business expenses (if any), minus approved personal tax reliefs

For example: a salaried employee earning RM72,000 per year who claims the standard individual relief of RM9,000, EPF relief of RM4,000, and lifestyle relief of RM2,500 would have a chargeable income of RM56,500. Tax is then applied to that RM56,500 using the bracket table, not to the original RM72,000.

The progressive tax bracket table (YA 2024 and 2025)

The brackets below are set by LHDN and apply for both Year of Assessment 2024 and Year of Assessment 2025. Each bracket rate applies only to the income within that band.

Chargeable Income (RM)	Rate on This Band	Cumulative Tax at Top of Band
0 to 5,000	0%	RM0
5,001 to 20,000	1%	RM150
20,001 to 35,000	3%	RM600
35,001 to 50,000	6%	RM1,500
50,001 to 70,000	11%	RM3,700
70,001 to 100,000	19%	RM9,400
100,001 to 400,000	25%	RM84,400
400,001 to 600,000	26%	RM136,400
600,001 to 2,000,000	28%	RM528,400
Above 2,000,000	30%	RM528,400 plus 30% on excess

Source: LHDN Tax Rate page (hasil.gov.my), applicable from YA 2020 onwards with the upper bands added progressively.

To illustrate how the progressive system works: if your chargeable income is RM60,000, you do not pay 11% on the entire amount. You pay 0% on the first RM5,000, 1% on the next RM15,000, 3% on the next RM15,000, 6% on the next RM15,000, and 11% only on the remaining RM10,000. Your total tax is RM2,600, which is an effective rate of around 4.3%, not 11%.

Key personal tax reliefs for YA 2025

Tax reliefs reduce your chargeable income before the bracket table is applied. Residents can claim multiple reliefs simultaneously. Here are the most widely applicable ones for Year of Assessment 2025 (filed in 2026), sourced from LHDN:

Relief Category	Maximum Claim (RM)
Individual and dependent relatives	9,000
Spouse (no income or joint assessment)	4,000
Child under 18, per child	2,000
Child in higher education, per child	8,000
Self education fees	7,000
Medical expenses (serious disease, fertility, vaccination, dental)	10,000
Medical expenses for parents (including grandparents from YA 2025)	8,000
EPF contributions (sub-limit within combined EPF + life insurance cap)	4,000
Life insurance premiums (combined cap with EPF above)	7,000 combined
Insurance premiums for education or medical policies	4,000
Lifestyle: books, devices, internet, courses, gym	2,500
Lifestyle: sports equipment and activities	1,000
SOCSO and EIS contributions	350
Private Retirement Scheme (PRS) and deferred annuity	3,000
SSPN net deposits for children’s education	8,000
Childcare fees (registered centres, extended to YA 2027)	3,000

In addition, a tax rebate of RM400 applies to residents with chargeable income below RM35,000. A rebate differs from a relief: it reduces your actual tax payable, not your income, so it is more valuable. Zakat and fitrah payments are also deductible as a rebate up to the tax amount payable.

Monthly tax deduction: PCB and MTD

Most salaried employees never write a cheque to LHDN because their employer withholds tax every month through a mechanism called Potongan Cukai Bulanan (PCB), also referred to in English as Monthly Tax Deduction (MTD). Your employer uses LHDN’s published schedule to estimate your annual tax liability and deducts a proportional amount from each payslip.

If your deductions closely match your actual liability and you have no additional income sources or complex reliefs to claim, you may opt for PCB Final status, meaning you are not required to file a tax return separately. Most employees with straightforward income situations qualify. If your actual reliefs exceed the defaults used in the PCB calculation, filing a return will result in a refund.

Filing deadlines for YA 2025 (Year of Assessment 2025)

Year of Assessment 2025 covers income earned from 1 January to 31 December 2025. Returns are submitted in 2026 through LHDN’s MyTax portal at mytax.hasil.gov.my.

Form	Who Files	Statutory Deadline	e-Filing Deadline
Form e-BE	Employees with no business income	30 April 2026	15 May 2026
Form e-B	Individuals with business income	30 June 2026	15 July 2026
Form e-M	Non-resident individuals	30 April 2026	15 May 2026

The e-Filing extension to mid-May and mid-July is administrative, not statutory, and LHDN confirms it annually. Tax due at filing must be paid by the same deadline to avoid a 10% late payment surcharge. If you have been making monthly PCB deductions, any remaining balance after filing is settled then.

First-time filers must register on MyTax to obtain a PIN before they can access e-Filing. The process takes a few minutes and requires your MyKad number and tax identification number (TIN).

Key takeaways

• Malaysian income tax is progressive: higher rates apply only to income within each band, not to your entire income.
• Residency is determined by physical presence (182 days or more in a calendar year), not citizenship.
• Residents enjoy rates from 0% to 30% and can claim reliefs; non-residents pay a flat 30% with no reliefs.
• Chargeable income is what remains after deducting approved reliefs from your total income.
• Most employees pay tax monthly via PCB; any balance or refund is settled when you file.
• The e-Filing deadline for salaried individuals (Form BE) for YA 2025 is 15 May 2026.
• A RM400 rebate applies if your chargeable income is below RM35,000, effectively making that band tax-free in many cases.

Frequently asked questions

Do I need to file if my employer already deducts PCB every month? Not always. If your only income is employment income, your employer has submitted your income details, and your PCB closely matches your liability, you may qualify to skip filing under the PCB Final arrangement. However, if you have other income sources, additional reliefs to claim, or wish to receive a refund, filing a return is the right move.

What happens if I miss the filing deadline? A late filing penalty of 10% of the tax payable can be imposed under Section 112 of the Income Tax Act 1967. LHDN typically sends a notice before escalating, and you can regularise your filing through MyTax.

I was a non-resident for part of the year. Which rules apply? Residency status is assessed for the entire Year of Assessment. If you meet the 182-day threshold for the year, you are taxed as a resident for that full year. If you do not, all income earned that year is taxed at the flat 30% non-resident rate, even for months you were present.

Can I claim EPF relief if I contribute voluntarily above the statutory rate? Yes, voluntary contributions to EPF are eligible for relief, subject to the same RM4,000 sub-limit within the combined EPF and life insurance relief cap of RM7,000.

What is the difference between a tax relief and a tax rebate? A relief reduces your chargeable income before the bracket table is applied. A rebate reduces your final tax payable after the bracket table calculation. Rebates are therefore more valuable per ringgit: the RM400 rebate for lower-income residents saves RM400 in tax, while a RM400 relief saves only RM400 multiplied by your marginal rate (for example, RM24 at the 6% bracket).

For more on how your EPF savings connect to your tax strategy, see EPF accounts explained. If you are also looking at how your property affects your tax position, the cost of buying property in Malaysia guide covers stamp duty and other obligations.

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All figures in this guide are based on LHDN published rates and reliefs for Year of Assessment 2025 as of June 2026. Tax rules can change with each Budget announcement. Verify current figures at hasil.gov.my before filing.