ringgitplus2026-03-1321 min read
Malaysia Personal Income Tax Guide 2026 (YA 2025)
In Collaboration with Steffi Manisha Arokiam, Tax Director at ThinkTx
If you earned around RM38,000 in 2025, income tax probably is not about managing a large bill; it is about recovering any excess tax paid. If your employer has been deducting MTD from your monthly salary throughout 2025, filing your income tax return correctly and claiming every relief you are entitled to will likely result in a full refund of whatever was withheld.
That is not a small thing. Once personal relief, EPF contributions, lifestyle purchases, and insurance premiums are taken into account, your chargeable income could fall below the taxable threshold, meaning income tax may not apply at all and every ringgit deducted could be refunded.
Tax returns for income earned between 1 January and 31 December 2025 must be submitted in 2026 through LHDN’s MyTax portal. Miss the deadline or skip the filing entirely, and you do not just lose the refund - you risk a penalty on top of it.
This guide walks through the full filing process: who needs to file, the current tax rates, every major relief available, how to submit through MyTax, and what to do if something goes wrong after you have filed.
Who Needs to Pay Income Tax in Malaysia?
Income tax applies to individuals whose annual income exceeds the taxable threshold.
You are required to file if you fall into any of the following categories:
- Individuals whose taxable income exceeds the minimum taxable threshold under the Income Tax Act 1967
- Salaried employees
- Self-employed individuals, freelancers, or business owners with taxable income
- Foreigners who have worked in Malaysia
Even if your employer has deducted MTD from your salary, you must still file an income tax return if your income exceeds the threshold.
Failure to file may result in penalties under the Income Tax Act 1967.
Malaysia Personal Income Tax Rates for YA 2025
Malaysia operates a progressive tax system. This means income is taxed in tiers, and only the portion within each band is taxed at the corresponding rate.
Resident individual tax rates for YA 2025 remain progressive, starting from 0% for lower income brackets and increasing for higher income levels.
Your tax payable depends on your chargeable income, which is calculated as per the table in the link below.
For example, if your chargeable income is RM48,000, your tax is calculated progressively across the relevant brackets. If you successfully claim RM13,500 in reliefs and reduce your chargeable income to RM34,500, you will enjoy a tax rebate of RM400.
Understanding how progressive tax works helps you plan your relief claims more effectively.
Tax Filing for Foreigners
Foreigners working in Malaysia are taxed according to their residency status.
Individuals who stay in Malaysia for 182 days or more in a calendar year are treated as tax residents. They are taxed at progressive resident rates and are eligible to claim tax reliefs and rebates.
Individuals who stay fewer than 182 days but work for at least 60 days are classified as non-residents. Non-residents are generally taxed at a flat rate of 30% on employment income and are not eligible for tax reliefs.
Summary Of Residency Treatment
Residency Status: Resident
Days In Malaysia: 182 days or more
Tax Treatment: Progressive rates
Relief Eligibility: Yes
Residency Status: Non-resident
Days In Malaysia: Fewer than 182 days
Tax Treatment: 30% flat rate
Relief Eligibility: No
Foreigners are not taxed in Malaysia if they work lesser than 60 days, receive qualifying pensions, earn Malaysian bank interest, or receive tax-exempt dividends.
Residence status directly affects both tax rates and eligibility for tax reliefs.
How to File Income Tax in Malaysia
The form you use depends on your income source.
- Form M – Non-residents
- Form BE – Resident individuals without business income
- Form B – Resident individuals carrying on a business
Filing Deadlines
Statutory filing deadlines under the Income Tax Act 1967 are as follows:
- Form BE (resident individuals without business income): 30 April 2026
- Form B (resident individuals carrying on a business): 30 June 2026
LHDN typically grants an administrative extension for e-Filing submissions each year. For YA 2025, the extended e-Filing deadlines are as follows:
- Form BE (e-Filing): 15 May 2026
- Form B (e-Filing): 15 July 2026
Taxpayers should always refer to LHDN’s official announcements for confirmation of the extended e-Filing dates.
All submissions must be completed electronically through MyTax.
Step-by-Step Guide to Filing via MyTax
(kindly refer to the link below)
Amending Your Income Tax Form
(kindly refer to the link below)
Paying Your Income Tax
After submission, you will either be entitled to a refund or required to settle the outstanding tax.
You Are Eligible for a Tax Refund
If your MTD exceeds your final tax liability, you are entitled to a refund.
Refunds are credited to the bank account provided in your tax return.
According to LHDN’s Client Charter:
- Refunds are processed within 30 working days after e-Filing submission, subject to verification
- Refunds for manual submissions may take up to 90 working days
Processing is subject to verification and may take longer if additional documents are required.
You Have Outstanding Tax to Pay
If your tax calculation shows a balance payable, you must settle it before the deadline to avoid penalties.
Malaysia operates under a Self-Assessment System. Taxpayers are responsible for computing and declaring their own tax correctly.
For payment methods and bill number requirement:
(kindly refer to link below)
Late Income Tax Payments
Failure to pay by the stipulated deadline will result in a 10% penalty.
If the outstanding amount remains unpaid after 60 days, an additional 5% penalty may be imposed.
Payment deadlines are:
- 15 May for individuals without business income
- 15 July for individuals with business income
The 10% penalty applies after the respective due date.
If you disagree with the penalty, you may submit a written appeal to the Collection Unit.
The penalty must be settled first. If your appeal is successful, LHDN will refund the amount.
Other Tax Offences and Penalties
Failure to file an Income Tax Return Form may result in:
- A fine of between RM200 and RM20,000
- Imprisonment for up to six months
- Or both
Understating income may result in:
- A fine of between RM1,000 and RM10,000
- A penalty of up to 200 percent of the tax undercharged
Wilful tax evasion may result in:
- A fine of between RM1,000 and RM20,000
- Imprisonment for up to three years
- A penalty of up to 300 percent of the tax undercharged
These penalties are imposed under the Income Tax Act 1967.
Appealing Your Notice of Assessment
(kindly refer to the link below)
When You May Stop Filing Income Tax
In Malaysia, individuals are generally required to file an income tax return annually if they have an active tax file, even if their income is low or the tax payable is nil.
However, under certain circumstances, you may apply to close your tax file permanently.
According to LHDN’s guidelines, you may request closure if:
- You have retired and no longer receive any taxable income
- You are leaving Malaysia permanently
- You are aged 55 or above and do not receive any taxable income
It is important to understand that tax file closure is not automatic. Simply having no income does not mean your filing obligation ends unless LHDN formally closes your file.
If you continue to receive income, including part-time, freelance, rental, or commission income, you are generally still required to file a tax return if your income exceeds the prescribed threshold. Filing serves as an official declaration of your income, even if no tax is ultimately payable.
For example, individuals below 55 years old who temporarily have no income may still need to file until their tax file is formally closed.
How to Close Your Tax File
To close your tax file permanently, you should:
- Submit an official written request to the LHDN branch handling your tax file
- State clearly the reason for closure, such as retirement or permanent departure
- Ensure there are no outstanding taxes, penalties, or unresolved refunds
LHDN will review your request and notify you of the outcome.
If you are leaving Malaysia permanently, you should also apply for a Tax Clearance Letter before departure. This confirms that all tax matters have been settled and is particularly important for employees who cease employment in Malaysia.
Employers are required to notify LHDN of employee cessation, and final tax assessments may be issued before departure.
For more detailed procedures, refer to LHDN’s guidelines on cessation of employment and termination of service.
Important Reminder
Closing your tax file should only be done if you are certain you will no longer earn taxable income in Malaysia.
If you resume earning income after your tax file has been closed, you must reactivate or register again with LHDN to remain compliant.