The Ultimate Guide to Calculating Malaysia Income Tax in 2025

Navigating the world of taxes can be tricky, but understanding how income tax works in Malaysia doesn’t have to be. Whether you’re a fresh graduate starting your first job, an expatriate living in Malaysia, or a seasoned professional, knowing how to accurately calculate your income tax is crucial for both your financial planning and tax compliance.

In 2025, Malaysia’s progressive tax system means that your income tax is based on your total earnings, with higher rates applied to higher income brackets. But what does that mean for you? How do you ensure you’re paying the right amount of tax without overpaying?

This guide breaks everything down into simple steps, with examples and useful tools, to make sure you’re fully prepared for tax season in 2025.

Why Knowing Your Income Tax is Crucial

Income tax plays a big role in your overall financial planning. By understanding how your taxes are calculated, you can:

• Avoid surprises: No more shock at the end of the year when you file your taxes.
• Maximize your tax savings: Knowing the right reliefs and deductions helps reduce your taxable income.
• Stay compliant: Avoid tax penalties or missed payments.

The Malaysian tax system is progressive, meaning the more you earn, the higher percentage of tax you pay. Let’s break down how this works.

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How the Malaysian Tax System Works in 2025

In Malaysia, the personal income tax system is progressive, meaning it increases with income. The government taxes different portions of your income at different rates.

Here are the updated tax brackets for 2025:

Chargeable Income (RM)	Tax Rate
0 – 5,000	0%
5,001 – 20,000	1%
20,001 – 35,000	3%
35,001 – 50,000	6%
50,001 – 70,000	11%
70,001 – 100,000	19%
100,001 – 400,000	25%
400,001 – 600,000	26%
600,001 – 2,000,000	28%
Over 2,000,000	30%

The key thing to remember is that only the income in each bracket is taxed at that rate. For example, if you make RM 70,000, you will only pay the highest tax rate (19%) on the income above RM 70,000, not on the entire income.

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Step-by-Step Guide to Calculate Your Monthly Salary Tax

Let’s walk through a real example to understand how to calculate your monthly salary tax.

Step 1: Determine Your Total Income

Start by calculating your total income for the year, which includes:

• Salary: The basic pay you receive from your job.
• Overtime: If you work extra hours.
• Bonuses and commissions: Any performance-based or annual bonuses.
• Allowances: Transportation, housing, or other benefits.

For instance, let’s say your annual salary is RM 65,000.

Step 2: Subtract EPF Contributions

Next, deduct the Employee Provident Fund (EPF) contributions. This is 11% of your salary for Malaysian employees. So, if your salary is RM 65,000:

• EPF Contribution = RM 65,000 × 11% = RM 7,150.

Step 3: Subtract Tax Reliefs

You can also claim tax reliefs that reduce your taxable income. Common reliefs include:

• Personal relief: RM 9,000 for individual taxpayers.
• Child relief: RM 2,000 per child under 18.
• Insurance premiums: Relief for life insurance premiums and EPF contributions.

In this example, we’ll assume you are eligible for the RM 9,000 personal relief.

Step 4: Calculate Your Taxable Income

Now, let’s calculate your taxable income by subtracting your EPF contributions and tax reliefs from your total income:

• Total income = RM 65,000
• EPF contribution = RM 7,150
• Tax relief = RM 9,000

Taxable income = RM 65,000 – RM 7,150 – RM 9,000 = RM 48,850.

Step 5: Apply the Progressive Tax Rates

Now, let’s apply the progressive tax rates to your taxable income of RM 48,850.

• First RM 5,000: Tax rate 0% → RM 0
• Next RM 15,000 (5,001 to 20,000): Tax rate 1% → RM 150
• Next RM 15,000 (20,001 to 35,000): Tax rate 3% → RM 450
• Remaining RM 13,850 (35,001 to 48,850): Tax rate 6% → RM 831

Total annual tax = RM 0 + RM 150 + RM 450 + RM 831 = RM 1,431.

Step 6: Calculate Monthly Tax

To calculate your monthly tax, simply divide the annual tax by 12:

• Monthly tax = RM 1,431 ÷ 12 = RM 119.25.

So, your employer will deduct RM 119.25 from your monthly salary as Monthly Tax Deduction (MTD).

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Maximizing Your Tax Savings: Expert Tips

You can reduce your taxable income and lower your tax bill with these tips:

• Claim all available reliefs: Don’t miss out on reliefs for children, insurance premiums, or educational expenses.
• Adjust your salary structure: Consider negotiating non-taxable benefits like transportation or housing.
• Invest in tax-exempt schemes: Consider contributing to the Private Retirement Scheme (PRS) or EPF to enjoy tax exemptions.

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Use the Best Online Tools for Accurate Tax Calculations

Using an online tax calculator is the fastest and easiest way to estimate your tax obligations. It will automatically calculate your annual and monthly tax based on the latest tax rates and reliefs available.

For a reliable and user-friendly tax calculator, visit Income Tax Calculator Malaysia. This tool will help you get an accurate tax estimate for 2025.

For more information on Malaysia’s income tax system and how to maximize your savings, check out this helpful external guide from Global Passport.

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Conclusion

Now that you know how to calculate your monthly salary tax in Malaysia, it’s time to get organized. By understanding your taxable income, applying tax reliefs, and using online calculators, you can ensure that you’re paying the right amount of tax — and potentially save money in the process.

Keep in mind that the Malaysian tax system is progressive, and there are many ways to reduce your taxable income. So, stay informed and make the most of the reliefs and deductions available to you.

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