How to Calculate Your 2025 Income Tax in Malaysia

If you’re a salaried employee, freelancer, or business owner in Malaysia, knowing the 2025 income tax rates is essential for smart financial planning. This guide explains how to calculate your tax, what reliefs you can claim, and what the progressive tax system means for you.

How to Calculate Your Tax: The 2025 Progressive Tax Brackets

Malaysia uses a progressive tax system for resident individuals. This means the more you earn, the higher your tax rate. Your tax is calculated based on your chargeable income, which is your total annual income minus all eligible tax reliefs and deductions.

Here are the official tax rates for the Year of Assessment 2025:

• RM0 – RM5,000: 0% (Tax on band: RM0)
• RM5,001 – RM20,000: 1% (Tax on band: RM150)
• RM20,001 – RM35,000: 3% (Tax on band: RM450)
• RM35,001 – RM50,000: 6% (Tax on band: RM900)
• RM50,001 – RM70,000: 11% (Tax on band: RM2,200)
• RM70,001 – RM100,000: 19% (Tax on band: RM5,700)
• RM100,001 – RM400,000: 25% (Tax on band: RM75,000)
• RM400,01 – RM600,000: 26% (Tax on band: RM52,000)
• RM600,001 – RM2,000,000: 28% (Tax on band: RM392,000)
• Exceeding RM2,000,000: 30%

This structure is a powerful signal of Malaysia’s commitment to equitable wealth distribution, ensuring a fairer tax burden across different income levels.

Real-Life Example: How do I calculate my income tax

To figure out your income tax, you first need to determine your chargeable income. This is your total annual income after deducting all eligible tax reliefs.¹

Let’s use a hypothetical example:

Ahmad’s Annual Income for 2025

• Total Annual Salary: RM85,000²
• Individual Relief: -RM9,000³
• EPF Contribution: -RM4,000⁴
• Lifestyle Relief (books, gym): -RM2,500⁵
• Total Tax Reliefs: RM15,500

1. Calculate Chargeable Income:RM85,000 (Total Income) – RM15,500 (Total Reliefs) = RM69,500
2. Apply the Progressive Tax Brackets:
   • The first RM50,000 of chargeable income is taxed at a fixed amount of RM1,500.⁶
   • The remaining amount is RM69,500 – RM50,000 = RM19,500.
   • This remaining amount falls into the next bracket (RM50,001 – RM70,000), which has a rate of 11%.
   • Tax on the remaining amount: RM19,500×11%=RM2,145.
3. Calculate Total Tax Payable:RM1,500 (Tax on first RM50,000) + RM2,145 (Tax on remaining RM19,500) = RM3,645

Ahmad’s total tax payable for the Year of Assessment 2025 is RM3,645. This demonstrates how claiming reliefs significantly reduces your chargeable income and, as a result, your final tax bill.

Claiming Tax Reliefs and Rebates

One of the most effective ways to lower your income tax is by claiming all eligible reliefs and rebates. These deductions reduce your chargeable income, meaning you pay less tax.

• Self-Relief: A standard RM9,000 for every taxpayer.
• EPF & Life Insurance: A combined relief of up to RM7,000.
• Medical Expenses: A relief of up to RM10,000 for serious illnesses, fertility treatments, and medical check-ups.
• Lifestyle Relief: Up to RM2,500 for items like books, personal computers, smartphones, and gym memberships.
• Education Fees: Up to RM7,000 for self-education at a tertiary level.
• Parent and Child Relief: Various reliefs for dependent parents, disabled children, and childcare fees.

To ensure you don’t miss out on any savings, it’s highly recommended to use a comprehensive tax calculator, such as the one provided by LHDN on their official MyTax portal. . This tool helps you accurately calculate your tax liability based on your specific situation.

FAQs about Malaysia Income Tax 2025

How do I know if I am a tax resident in Malaysia?

In Malaysia, an individual’s tax residency is determined based on their physical presence in the country, not their citizenship.¹ This status is crucial because it dictates whether you’re taxed at the progressive resident rates or a flat non-resident rate.²

Here are the four key conditions to be considered a tax resident for a given year, according to the Inland Revenue Board of Malaysia (LHDN):

1. The 182-Day Rule: You are physically present in Malaysia for 182 days or more in that calendar year.³ These days don’t have to be consecutive; they can be accumulated throughout the year.⁴
2. The “Linked” Period Rule: You are in Malaysia for less than 182 days in the current year, but that period is linked to a consecutive period of 182 days or more in the immediately preceding or succeeding year.⁵ Certain temporary absences (up to 14 days for social visits, or for professional matters or illness) can still be counted as part of this consecutive period.⁶
3. The 90-Day Rule: You are in Malaysia for a period or periods amounting to 90 days or more in the current year, and in any three of the four immediately preceding years, you were either a tax resident or present in Malaysia for 90 days or more.⁷
4. The “Future Resident” Rule: You have been a tax resident for the three consecutive years immediately preceding the current year and will be a tax resident in the year immediately following the current year.⁸ This is the only scenario where you can be a resident even if you were not in Malaysia at all during the current year.

If you don’t meet any of these criteria, you are considered a non-resident for tax purposes. Non-residents are typically subject to a flat tax rate of 30% on all income earned in Malaysia and are not eligible for the personal reliefs and deductions available to residents.⁹

What is the tax rate for non-residents?

Non-residents are taxed at a flat rate of 30% on all income derived from Malaysia. They are not eligible to claim personal tax reliefs.

How can I file my income tax return for 2025?

You can file your tax return for the Year of Assessment 2025 electronically via the LHDN MyTax e-Filing platform. This is the fastest and most reliable method.

What is the minimum annual salary to pay income tax in Malaysia?

The minimum chargeable income is RM5,001. However, after claiming personal relief (RM9,000), most people with an annual income below RM34,000 will have a chargeable income of RM0 and therefore pay no tax.

Why is EPF a key part of tax planning in Malaysia?

EPF contributions are a critical tax relief. By contributing to your EPF, you are not only saving for retirement but also reducing your chargeable income, lowering your overall tax bill. For many, this is a cornerstone of their tax strategy.