Common FAQs on Personal Income Tax Rates in Malaysia

Taxes are a prima facie source of revenue for the Government authorities. Taxes are used to fund public services, increase in development, etc. There are two types of taxes direct and indirect taxes. In this article, we will cover about personal income tax which is a part of direct taxes.

Personal income tax is a tax imposed by the Government on an income of an individual or business. The basic mechanism is that there are tax rates and based on your income accordingly the taxpayer must pay taxes. Let us see some common FAQs about personal income tax in Malaysia.

On what sources of income is the tax levied?

Taxes are levied on 

• Salaries, wages, bonus etc.
• Gains or profits of a business
• Dividends, interests, or discount
• Rent, royalties, or premiums
• Pensions, annuities
• Different types of perquisites like credit cards, bill claims, sponsored club memberships, and other benefit, etc. which are cashable.

What are the rate of personal income taxes in Malaysia?

For Assessment year 2023, rates of income tax are-       

Non-Residents are subjected to withholding taxes on certain incomes. Other incomes are taxed at 30%.

What is the definition of a resident in Malaysia?

Individuals are considered resident in any of the following circumstances:

• they are physically present in Malaysia for 182 days or more during the calendar year.
• they are physically present in Malaysia for less than 182 days during the calendar year, but are physically present in Malaysia for at least 182 consecutive days in the second half of the immediate preceding calendar year or in the first half of the immediate following calendar year. 

However, temporary absence are considered a period of consecutive presence if the absence is related to the individual’s service in Malaysia, or any illness or social visits not exceeding 14 days, etc.

• they are present in Malaysia during the calendar year for at least 90 days and have been resident or present in Malaysia for at least 90 days in any three of the four preceding years.
• they have been resident for the three preceding calendar years and will be resident in the following calendar year. This is the only case in which an individual may qualify as a resident even though he or she is not physically present in Malaysia during a particular calendar year

For the purposes of determining residence, presence during part of a day is counted as a whole day.

However, exemptions are there during COVID-19 pandemic-related situations for which travel restrictions were imposed.

Which act governs the taxation system in Malaysia?

Income Tax Act (ITA), 1967, governs the taxation system in Malaysia.

Are people liable on income earned outside India?

No. Residents and non-residents are subject to tax on income derived from Malaysia only.

How to calculate taxable income?

Taxable income can be calculated by deducting total exemptions and tax reliefs from the total annual income.

What is the year of tax?

In Malaysia, calendar year which is 1^st January – 31^st December is taken into effect.

When is the due date of filing the return?

The due date of filing the return is at the end of 4 months after the calendar year ends which is 30^th April (without business income) and 30^th June (with business income).

Are there any exemptions, tax reliefs available for taxpayers in Malaysia?

Yes, there are many tax exemptions or reliefs which are provided to the taxpayer. Infact, if a taxpayer does a proper tax planning, it can help them a lot.

Some of the reliefs mentioned are:

• Malaysian government has introduced, Returning Expert Programme wherein Malaysian professionals returning from abroad to work in Malaysia, would be charged 15% rate for first five consecutive years.
• Out of many benefits, some of them are listed below: