Malaysia Salary & Income Tax Rate Guide 2026

One of the first things employees usually check when they receive their payslip is how much tax has been deducted from their salary.

Even a small miscalculation can raise questions about take-home pay.

That’s why employers must clearly understand how salary tax works in Malaysia, from tax rates and deductions to employer responsibilities to ensure smooth payroll processing and avoid unnecessary disputes.

Below is a complete and updated guide to Malaysia’s salary tax system for 2026.

Who Has to Pay Salary Tax in Malaysia

Salary tax applies to individuals who earn taxable income. However, liability depends on residency status.

Malaysian Tax Residents

Tax residents are taxed on:

Income earned in Malaysia
Foreign-sourced income remitted into Malaysia

Important update: From 1 January 2022 until 31 December 2026, foreign income remitted into Malaysia is tax-exempt, except for income derived from business partnerships.

Non-Residents / Foreign Employees

Non-residents:

Are taxed only on income earned in Malaysia
Do not pay tax on overseas income
Are subject to a flat 30% tax rate

How to Determine Tax Residency Status

An individual is considered a tax resident in Malaysia if they meet any one of the following conditions:

Stayed in Malaysia for at least 182 days in a calendar year, OR
Stayed less than 182 days but combined with stays in the preceding or following year, totalling 182 days, OR
Stayed at least 90 days in the current year and at least 90 days in three out of the last four years, OR

Has been a resident for three consecutive years and continues to be resident in the following year.

What Is the Minimum Salary to Pay Income Tax in Malaysia?

Employees are taxed based on chargeable income, not gross salary.

Income RM5,000 or below per year → No tax
Income above RM5,000 per year → May be taxable depending on deductions and tax reliefs

In practice, most employees usually start paying income tax when their annual salary exceeds RM34,000, after accounting for EPF and standard reliefs.

How Salary Tax Works in Malaysia

Malaysia applies a progressive tax system, meaning:

Higher income = higher tax rate
Tax is charged in tiers

Tax is calculated on chargeable income, which is income after deducting:

EPF contributions
SOCSO and EIS
Individual tax reliefs

Monthly Tax Deduction (MTD / PCB)

For employees, income tax is deducted monthly via:

Potongan Cukai Bulanan (PCB)

Employers must:

Calculate PCB accurately
Deduct tax before salary payment
Submit deductions monthly to LHDN

This system helps employees avoid paying a large lump sum during annual tax filing.

Malaysia Income Tax Rate Brackets (Assessment Year 2023, 2024 & 2025)

The following tax rates are based on the official LHDN income tax table and are applicable for resident individuals.

Category	Chargeable Income (RM)	Calculation (RM)	Rate (%)	Tax (RM)
A	0 – 5,000	On the first 5,000	0%	0
B	5,001 – 20,000	On the first 5,000Next 15,000	1%	0 150
C	20,001 – 35,000	On the first 20,000Next 15,000	3%	150 450
D	35,001 – 50,000	On the first 35,000Next 15,000	6%	600 900
E	50,001 – 70,000	On the first 50,000Next 20,000	11%	1,500 2,200
F	70,001 – 100,000	On the first 70,000Next 30,000	19%	3,700 5,700
G	100,001 – 400,000	On the first 100,000Next 300,000	25%	9,400 75,000
H	400,001 – 600,000	On the first 400,000Next 200,000	26%	84,400 52,000
I	600,001 – 2,000,000	On the first 600,000Next 1,400,000	28%	136,400 392,000
J	Exceeding 2,000,000	On the first 2,000,000Next Ringgit	30%	528,400

Source: Lembaga Hasil Dalam Negeri Malaysia (LHDN)

Non-Resident Tax Rate

Flat 30% on all income earned in Malaysia

Employer Responsibilities for Salary Tax

Employers in Malaysia are legally required to:

Deduct PCB before salary payment
Submit Form CP39 monthly
Pay deducted tax before the 15th of the following month
Maintain accurate payroll records
Ensure full compliance with LHDN regulations

Failure to comply may result in:

Late payment penalties
Additional tax charges
Legal action

Employee Responsibilities for Salary Tax

Employees are responsible for:

Checking monthly PCB deductions
Filing annual income tax returns (Form e-BE or e-B)
Keeping supporting documents such as:
- Payslips
- EPF & SOCSO statements
- Tax relief receipts

If excess tax has been deducted, employees may receive a tax refund after filing.

Common Tax Deductions & Reliefs in 2026

Employees can reduce taxable income through eligible reliefs, including:

EPF contributions
SOCSO & EIS contributions
Medical expenses
Education fees
Lifestyle reliefs (books, gadgets, sports equipment, internet)
Parental care expenses
Child and childcare reliefs

Maximising reliefs helps lower monthly PCB deductions.

Example: How to Calculate Salary Tax in Malaysia

Annual salary: RM85,000

Step 1: Calculate chargeable income

EPF contribution: RM9,350
Other reliefs: RM3,000

Chargeable income: RM85,000 − RM9,350 − RM3,000 = RM72,650

Step 2: Apply tax brackets

First RM70,000 → RM3,700 tax
Remaining RM2,650 at 19% → RM503.50

Total annual tax payable: RM4,203.50

(Actual PCB may vary depending on marital status and additional reliefs.)

Online Salary Tax Calculators

Employees and HR teams can estimate tax using:

LHDN MyTax Calculator

As an employer, salary tax should never become a source of confusion or conflict.

Incorrect PCB calculations, late payments, or non-compliance can lead to:

Employee dissatisfaction
Financial penalties
Legal risks

By staying updated with Malaysia’s tax rules in 2026, employers can ensure accurate payroll processing and maintain employee trust.

FAQs

How much salary is taxable in Malaysia?

Employees earning more than RM5,000 per year may be taxable, depending on reliefs and deductions.

What is the PCB tax rate?

PCB follows Malaysia’s progressive income tax brackets.

How can employees reduce taxable income?

By claiming tax reliefs, contributing to EPF, and declaring eligible expenses.

What happens if employers fail to deduct PCB?

Employers may face penalties, fines, or enforcement action by LHDN.

How do employees check their tax number?

Through the MyTax portal or at the nearest LHDN branch.

At what salary do Malaysians usually start paying tax?

Most employees begin paying tax when annual income exceeds around RM34,000, after reliefs.

What is the income tax rate for foreigners?

Non-residents: 30% flat rate
Residents: Progressive rates based on income

Is salary tax-free in Malaysia?

No. Income tax applies unless chargeable income falls below RM5,000 annually.

Need Help Calculating PCB, EPF or Statutory Deductions?

Managing payroll manually can be time-consuming, especially when dealing with PCB calculations, EPF contributions, SOCSO, and EIS deductions.

To help employers stay compliant and reduce calculation errors, you can use AJobThing’s free HR tools:

PCB Calculator – Estimate monthly tax deductions accurately before salary payout
EPF / SOCSO / EIS Calculator – Instantly calculate statutory contributions for employee

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