Malaysia Income Tax Exemption 2025 Guide for Employers & HR

Managing income tax season does not only affect employees. For HR teams and employers, it is a critical compliance period that requires accurate payroll data, proper documentation, and timely statutory submission.

This guide is prepared to help employers and HR teams in Malaysia clearly understand:

What income tax exemptions apply for Assessment Year 2025
What employees will declare during e-Filing 2026
What documents employers must prepare
How HR can support employees and avoid payroll or tax issues

All explanations are written in easy English, suitable for Malaysian workplaces.

Why Income Tax Matters for Employers and HR

Although employees submit their own income tax returns, employers play an essential role in the process.

HR responsibilities directly affect employee tax filing, including:

Issuing accurate EA Forms
Ensuring correct PCB deductions
Submitting employer tax forms on time
Maintaining complete payroll records

Errors or delays may result in:

Employee dissatisfaction
Incorrect tax filing
Delayed tax refunds
LHDN audit risks
Possible penalties

Understanding tax exemptions and e-Filing requirements helps HR teams manage tax season smoothly every year.

Official Updates: Income Tax 2025

(Filed During e-Filing 2026)

The following updates apply to Assessment Year 2025, which employees will declare during e-Filing in 2026.

First-Time Home Loan Interest Relief

Applicable for:

First residential property purchase
Sales & Purchase Agreement signed between 1 January 2025 – 31 December 2027

Relief amount:

RM7,000 – house price up to RM500,000
RM5,000 – house price RM500,001 to RM750,000

This relief can be claimed for three consecutive assessment years, starting from the year interest is paid.

Education and Medical Insurance Premium Relief

Relief cap increased from RM3,000 to RM4,000
Covers medical insurance and education insurance

Tax Relief for Persons with Disabilities (PWD)

Category	Before YA 2025	From YA 2025
Disabled individual	RM6,000	RM7,000
Disabled spouse	RM5,000	RM6,000
Unmarried disabled child	RM6,000	RM8,000

HR should ensure employee personal information is reflected correctly in EA Forms where applicable.

List of Individual Tax Reliefs

Assessment Year 2025 (e-Filing 2026)

Individual Relief

Individual and dependent relatives: RM9,000
Disabled individual: RM7,000
Disabled spouse: RM6,000
Spouse or alimony: RM4,000
Self-education fees: RM7,000
First home loan interest: RM7,000 / RM5,000

Medical, Lifestyle & Equipment Reliefs

Medical reliefs include:

Serious illness treatment
Fertility treatment
Vaccination (up to RM1,000)
Dental treatment (up to RM1,000)
Mental health consultation
Medical check-ups

Other reliefs:

Medical expenses for parents: RM8,000
Special needs equipment: RM6,000
EV charging equipment: RM2,500

Lifestyle relief (RM2,500):

Laptop or computer
Smartphone or tablet
Internet subscription
Books
Skill courses

Sports-related relief: RM1,000

Child Relief

Child below 18 years: RM2,000
Child above 18 (full-time student): RM2,000
Higher education child: RM8,000
Disabled child: RM8,000
Additional disabled child relief: RM8,000
Childcare fees (6 years and below): RM3,000
Breastfeeding equipment: RM1,000

Contributions & Savings Relief

Life insurance & EPF: RM7,000
EPF only: RM4,000
SOCSO: RM350
Medical & education insurance: RM4,000
Private Retirement Scheme (PRS): RM3,000
SSPN net savings: RM8,000

Who Is Required to Pay Income Tax in Malaysia

Income tax liability depends on marital status, number of children, and type of assessment.

Estimated Income Threshold (Reference Only)

Type of Assessment	Annual (RM)	Monthly (RM)
Individual / Single	36,000	3,000
Married (Separate) – 0 child	36,000	3,000
Married (Separate) – 1 child	38,000	3,167
Married (Separate) – 2 children	40,000	3,333
Married (Joint) – 0 child	46,000	3,833
Married (Joint) – 1 child	49,000	4,083
Married (Joint) – 2 children	52,000	4,333

Figures are estimates only. Actual tax payable depends on relief claims and LHDN assessment.

Employer Role in Income Tax Compliance

Employers must:

Deduct PCB monthly
Submit CP39 payments
Issue EA Forms before end of February
Submit Form E
Keep payroll records for at least 7 years

e-Filing 2026 Timeline (Assessment Year 2025)

Filing opens: 1 March 2026

Deadlines:

BE (no business income): 15 May 2026 (e-Filing)
B (with business income): 15 July 2026 (e-Filing)

Documents Employees Need (Prepared by HR)

EA Form
Payroll summary
PCB deduction record
EPF and SOCSO contribution figures

e-Filing Process for Employees

Employees must submit their own income tax return through the MyTax LHDN portal. HR does not file on behalf of employees but must ensure all payroll data is accurate.

Step 1: Register Income Tax Number (First-Time Only)

Employees who have never filed tax must register through:

e-Daftar (online – recommended), or
LHDN branch counter

Documents usually required:

MyKad or passport
Payslip or income statement
Business registration (if applicable)

Step 2: Activate MyTax Account

After receiving the tax number, employees must:

Request PIN via e-CP55D
Confirm registered email
Click activation link sent by LHDN

Activation link is valid for 2 days.

Step 3: Register Digital Certificate

Employees will:

Create password
Create security phrase
Confirm personal details

Once completed, MyTax account is fully activated.

Step 4: Log In to MyTax

IC or passport number
Password
Security phrase

Step 5: Submit e-Filing

Log in to MyTax
Click Filing & Submission
Select Assessment Year 2025
Choose form:
- e-BE (employees – most common)
- e-B (with business income)
Enter income based on EA Form
Declare PCB deducted
Claim tax reliefs
Review summary

Step 6: Sign & Submit

Click Sign & Submit
Enter IC number and password
Save submission receipt

Receipts and documents must be kept for 7 years.

Consequences of Non-Compliance

10% penalty on unpaid tax
Additional 5% late payment penalty
Legal action by LHDN
Travel restrictions
Asset seizure in severe cases

Notes for Employers and HR

Income tax season is not only an employee responsibility.

HR and employers play a critical role in ensuring:

Accurate payroll processing
Correct statutory deductions
Timely documentation
Smooth e-Filing experience for employees

With proper preparation and the right tools, HR teams can minimise errors, reduce employee complaints, and maintain full tax compliance.

For a clearer explanation, you can also refer to this video guide:

FAQs

If PCB is already deducted, do I still need to submit e-Filing?

Yes. PCB is only a monthly deduction. You must still submit e-Filing every year to declare your income and tax reliefs.

What if my EA Form details are wrong?

Inform your HR team immediately. HR will issue a corrected EA Form if needed.

Do I need to upload receipts for tax relief?

No. Receipts do not need to be uploaded, but must be kept for 7 years for LHDN checking.

Are bonuses and allowances taxable?

Yes. Bonuses, commissions, overtime and most allowances are taxable and must be declared.

What happens if I don’t submit e-Filing?

You may face penalties or legal action. Once you have a tax number, annual e-Filing is required even if no tax is payable.

Calculate Payroll & Statutory Contributions the Easy Way

During tax season, doing a quick check can help avoid mistakes later. HR teams can use the calculators below as a simple reference before finalising payroll.

PCB Calculator - Use this calculator to roughly estimate monthly PCB deductions based on salary, EPF contribution and tax category.
EPF / SOCSO / EIS Calculator - Easily check statutory contribution amounts for both employer and employee portions.

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