Budget 2025 Update: Personal Income Tax

• Serious illness for self, spouse or child;
• Fertility treatment for self or spouse;
• Vaccination for self, spouse or child, limited to RM1,000
• Dental examination and treatment expenses for self, spouse or child, limited to RM1,000
• Full medical check-up, mental health check-up or consultation and COVID-19 detection test inclusive of the purchase of self- test kit for self, spouse or child, limited to RM1,000
• Assessment of diagnosis, early intervention programme and rehabilitation treatment for children aged below 18 years with learning disability such as autism, attention deficit hyperactivity disorder (ADHD), global developmental delay (GDD), intellectual disability, down syndrome and specific disabilities, limited to RM4,000

PROPOSAL:
The relief for full medical check-up, mental health check-up or consultation and COVID-19 detection test limited to RM1,000, be expanded as follows:

• Full medical check-up, mental health check-up or consultation
• Purchase of self-test kit, such as COVID-19 and influenza test kit
• Purchase of self-testing medical devices such as glucometer, pulse oximeter, blood pressure monitor and thermometer
• Fees for disease detection examination conducted at clinic or hospital such as blood test ultrasound, mammogram and pap smear

The relief of assessment and diagnosis, early intervention programme and continuous rehabilitation treatment for children aged below 18 years with learning disability such as autism, ADHD, GDD, intellectual disability down syndrome and specific learning disabilities, the limit be increased from RM4,000 to RM6,000

EFFECTIVE DATE:
From the year of assessment 2025

DISABLED PERSON

CURRENT POSITION:
Disabled taxpayers registered with the Department of Social Welfare are given tax relief of RM6,000.
In addition, individual taxpayers are also eligible to claim tax relief, as follows:

• Further tax relief of RM5,000 for disabled spouse
• Further tax relief of RM6,000 for unmarried children with disabilities

PROPOSAL:

• Further tax relief for the disabled individual taxpayer, be increased from RM6,000 to RM7,000
• Further tax relief for the individual taxpayer with a disabled spouse, be increased from RM5,000 to RM6,000
• Further tax relief for the individual taxpayer with unmarried disabled children be increased from RM6,000 to RM8,000

EFFECTIVE DATE:
From the year of assessment 2025

SPORTS ACTIVITIES, HEALTH AND ELDERLY CARE

CURRENT POSITION:
 

In addition, individual income tax exemption of up to RM3,000 per year is given on child allowance received by employees or paid directly by employers to child care centres for children aged 12 years and below.

Moreover, employers are also given further tax deductions for the following expenses:

• Provision and maintenance of child care centres
• Child care allowance paid by employers to employees

PROPOSAL:
A. Individual income tax relief

• Individual income tax relief of up to RM1,000 for expenses on sports and activities for self, spouse and child be expanded to parents
• Full medical check-up expenses for parents, limited to RM1,000 be expanded to include vaccination
• Medical treatment, special needs, and parental care expenses be expanded to grandparents as follows:
  • Medical treatment at clinics and hospitals
  • Treatment and homecare nursing, day care centres and residential care centres
  • Dental treatment not including cosmetic dental treatment
  • Full medical check-up and vaccination, limited to RM1,000

B. Individual income tax exemption

The individual income tax exemption of up to RM3,000 per year given on child care allowance received by employees or paid directly by employers to child care centres be expanded to include elderly care (parents/granparents)

C. Further tax deduction

The further tax deduction on child care allowance paid by employers to employees be expanded to include elderly care (parents/granparents)

EFFECTIVE DATE:
From the year of assessment 2025

CONTRIBUTION TO PROVIATE RETIREMENT SCHEMES AND DEFERRED ANNUITIES

CURRENT POSITION:
Individual income tax relief of up to RM3,000 is given on contributions to Private Retirement Scheme (PRS) approved by the Securities Commission Malaysia and on premiums paid for deferred annuities. The relief is available from the year of assessment 2012 until the year of assessment 2025.

A withholding tax at a rate of 8% is imposed on the withdrawal of contributions before reaching the age of 55, except for permitted purposes as follows:

• Permanent total disability
• Serious illness
• Mental incapacity
• Dealth
• Permanent departure from Malaysia
• Heathcare
• Housing

PROPOSAL:
The income tax relief on contributions to PRS and premiums paid for deferred annuities be extended for 5 years.

EFFECTIVE DATE:
From the year of assessment 2026 until the year of assessment 2030

EDUCATION AND MEDICAL INSURANCE

CURRENT POSITION:
Individual income tax relief of up to RM3,000 is given on premiums paid for education and medical insurance for self, spouse and child.

PROPOSAL:
The individual income tax relief on premium paid for education and medical insurance be increased from RM3,000 to RM4,000.

EFFECTIVE DATE:
From the year of assessment 2025
 

CURRENT POSITION:
Individual income tax relief of up to RM8,000 is given on net annual savings in the National Education Saving Scheme (Skim Simpanan Pendidikan Nasional - SSPN) effective from the year of assessment 2007 until the year of assessment 2024.

 

PROPOSAL:
The individual income tax relief of up to RM8,000 on net annual savings in SSPN be extended for 3 years, subject to the following additional conditions:

• The tax relief can only be claimed by either parent, for SSPN savings, with maximum claim limited to RM8,000
• Withdrawal from the SSPN fund intended to finance education costs for further studies will not be considered in the calculation of net savings for that particular year and will not affect the eligible amount for tax relief

EFFECTIVE DATE:
From the year of assessment 2025 until the year of assessment 2027
 

CURRENT POSITION:
Individual income tax relief up to RM10,000 per year was given on housing loan interest payment, subject to the following conditions:

• The taxpayer is a Malaysian citizen and resident
• Limited to 1 residential property including flats, apartments or condomimums
• The sales and purchase agreement execuated from 10/03/2009 until 31/12/2010

Individual income tax relief was given for 3 consecutive year of assessment, commencing from the first year the housing loan interest was paid.

PROPOSAL:
The individual income tax relief be given on the interest payments for the first residential home loan (individually or jointly owned), as follows:
 

PROPOSAL:
Individual income tax relief on the interest payment is subject to the following conditions:

• The residential home must not be used to generate any income
• The sales and purchase agreement must be executed from 01/01/2025 until 31/12/2027
• The amount of individual income tax relief on allowable interest payment is applicable for 3 consecutive years of assessment, commencing from the first year the housing loan interest is paid
• Two or more individuals are eligible to claim tax relief on housing loan interest for the same residential home based on apportionment of the interest payment

EFFECTIVE DATE:
For the sales and purchase agreement for the first residential home executed from 01/01/2025 until 31/12/2027

Individual income tax relief of up to RM2,000 is provided for fees paid to Child Care Centres (TASKA) registered with the Department of Social Welfare or Kindergartens (TADIKA) registered with the Ministry of Education Malaysia, for children up to 6 years old. This tax relief can only be claimed by either parent.

The tax relief limit has been increased to RM3,000 for a limited period from the year of assessment 2020 until the year of assessment 2024.

PROPOSAL:
The individual income tax relief up to RM3,000 be extended for 3 years.

EFFECTIVE DATE:
From the year of assessment 2025 until the year of assessment 2027

CURRENT POSITION:
The individual income tax relief on the expenses on charging facilities for Electric Vehicle (not for business use) is RM2,500 maximum.

PROPOSAL:
The scope of relief on expenses for electric vehicle charging equipment be expanded to include the purchase of food waste composting machines for household use, with the relief limit remaining at RM2,500. The relief for the purchase of food waste composting machines be allowed to be claimed once within 3 years of assessment

EFFECTIVE DATE:
From the year of assessment 2025 until the year of assessment 2027
 

CURRENT POSITION:
Since the year of assessment 2008, income tax has been imposed at a single level (single-tier) on dividends distributed by companies. Under this single-tier tax system, the tax on company profits is final, and dividends distributed are exempted from tax at the shareholder level.

PROPOSAL:
A. Scope of taxation on dividends

• Dividend income received by individual shareholders for dividends paid, credited or distributed from company profits
• Individual shareholders consist of resident individuals, non-residents and individuals who hold shares through nominees

B. Threshold and formula to determine dividend chargeable income

• Threshold: Annual dividend income exceeding RM100,000
• Determination formula for dividend chargeable income: if the taxpayer has dividend income and other than dividend income, the determination of the distribution of the amount of chargeable income from dividends is based on the following formula:

A/B x C = D

A - Dividend statutory income

B - Aggregate income

C - Chargeable income

D - Chargeable dividend income

C. Tax rate
A rate of 2% is imposed on chargeable dividend income after taking into account allowances and deductions.

D. Exemption from Dividend Tax is as follows:

• Dividend income from abroad
• Dividend income distributed from the profits of companies that received pioneer status and reinvestment allowances
• Dividend income paid, credited or distributed from the profits of shipping companies that is exempted from tax
• Dividend income distributed by cooperatives
• Dividend income declared by closed-end funds
• Dividend income received by residents from Labuan entities
• Any exemption given on dividend income at shareholder level

E. Dividend Tax is not applicable to profit distributions made to contributors and depositors by:

• Kumpulan Wang Simpanan Pekera (KWSP)
• Lembaga Tabing Angkatan Tentera (LTAT)
• Amanah Saham Nasional Bumiputera (ASNB)
• Any unit trust

EFFECTIVE DATE:
From the year of assessment 2025