Most Malaysians wonder every year: How do I calculate my income tax and know how much I’ll actually pay?
Whether you’re an employee, freelancer, or running a side business, understanding how Malaysia’s income tax works helps you plan smarter and avoid surprises when filing with LHDN (Inland Revenue Board of Malaysia).
This 2025 guide breaks down the process step by step, with examples and links to free tools that make tax estimation easy.
How Malaysia’s Income Tax System Works
Malaysia uses a progressive tax system, meaning higher income levels are taxed at higher rates.
The Year of Assessment (YA 2025) follows rates from 0% to 30% for resident individuals, while non-residents are generally taxed at a flat 30%.
Your tax is based on your chargeable income, which is your total earnings minus deductions, reliefs, and allowable rebates.
Step-by-Step: How to Calculate Your Income Tax in Malaysia
Step 1: Determine Your Total Annual Income
Include all taxable sources such as:
- Monthly salary and wages
- Bonuses, commissions, and allowances
- Freelance or contract income
- Rental income from property
- Dividends and other local income
Tip: If you earn from multiple sources (for example, salary plus rental), combine all of them before moving to the next step.
Step 2: Deduct Statutory Contributions
Certain payments automatically reduce your taxable income:
- EPF (Employee Provident Fund) contributions (up to RM7,000)
- SOCSO and EIS contributions
- Zakat paid through authorized institutions
Example:
If your total income is RM60,000 and you contribute RM7,000 to EPF and RM300 to SOCSO,
Adjusted Income = RM60,000 − RM7,300 = RM52,700
Step 3: Apply Personal Tax Reliefs
Tax reliefs help reduce your chargeable income even more. Some common ones for 2025 include:
| Relief Category | Maximum Amount (RM) |
|---|---|
| Individual (Self) | 9,000 |
| EPF + Life Insurance | 7,000 |
| Spouse (if supported) | 4,000 |
| Child (each) | 2,000–8,000 |
| Lifestyle (Books, Internet, Gadgets) | 2,500 |
| Medical / Education | 8,000 |
Example:
If you claim RM9,000 (self) and RM7,000 (EPF & insurance):
Reliefs = RM16,000
Chargeable Income = RM52,700 − RM16,000 = RM36,700
If you’re unsure what qualifies, try the Malaysia Tax Relief Calculator.
Step 4: Apply the 2025 Tax Rates
| Chargeable Income (RM) | Tax Rate | Example Tax (RM) |
|---|---|---|
| 0 – 5,000 | 0% | 0 |
| 5,001 – 20,000 | 1% | 150 |
| 20,001 – 35,000 | 3% | 450 |
| 35,001 – 50,000 | 6% | 900 |
| 50,001 – 70,000 | 11% | – |
| 70,001 – 100,000 | 19% | – |
| 100,001 – 250,000 | 25% | – |
| 250,001 – 400,000 | 26% | – |
| 400,001 – 600,000 | 28% | – |
| Above 600,000 | 30% | – |
For the example (RM36,700 chargeable income):
- First RM20,000 → RM150 tax
- Next RM15,000 → RM450 tax
- Remaining RM1,700 → RM102 tax
Total = RM702
Step 5: Subtract Rebates and Finalize Your Tax Payable
Tax rebates can directly reduce your payable amount:
- Zakat rebate – equal to zakat paid to an approved institution
- Tax rebate for individuals with income ≤ RM35,000
Example:
If you paid RM300 in zakat,
Final Payable Tax = RM702 − RM300 = RM402
You can verify your estimate instantly using the Malaysia Income Tax Rate Calculator.
Example: Malaysia Income Tax Calculation for 2025
| Description | Amount (RM) |
|---|---|
| Annual Salary | 60,000 |
| Deductions (EPF, SOCSO) | 7,300 |
| Reliefs (Self + EPF) | 16,000 |
| Chargeable Income | 36,700 |
| Tax Before Rebate | 702 |
| Zakat Rebate | 300 |
| Final Payable Tax | 402 |
Common Questions About Malaysia Income Tax
Who needs to pay income tax?
Anyone earning more than RM34,000 per year (after EPF) must register with LHDN.
How are bonuses taxed?
Bonuses are part of your total employment income. See the Malaysia Bonus Tax Calculator for accurate estimates.
How do I estimate monthly PCB deductions?
Use the official LHDN PCB table or compare it with your employer’s monthly deductions in your pay slip.
Can self-employed individuals calculate tax the same way?
Yes, but they must declare business profits and deduct allowable expenses.
When is the tax filing deadline for YA 2025?
Usually by April 30, 2025 for individuals without business income and June 30, 2025 for business owners.
Willium is the creator of IncomeTaxCalculatorMalaysia.com, a trusted resource for accurate and easy-to-use tax calculation tools. With a deep understanding of Malaysia’s tax system, he helps individuals and businesses estimate their income tax with confidence. Willium is dedicated to simplifying financial decisions by offering clear, reliable tools and expert guidance, empowering users to stay informed and save time.