Tax Relief 2025 Malaysia: Complete LHDN Guide & Personal Deductions
Tax Relief 2025 Malaysia: Complete Guide on Income Tax Deductions, Eligibility & MyTax Filing
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Tax Relief 2025 Malaysia: Complete Guide on Income Tax Deductions, Eligibility & MyTax Filing

Posted on 14 November 2025 in Business | Suki Bajaj

Keeping track of the latest updates on LHDN's tax relief 2025 is all about making smarter business decisions and fostering a happier, more engaged workforce.

The government is introducing new tax measures (for the 2025 Year of Assessment) to ease financial burdens and encourage investment in key areas. For your company, this is a golden opportunity:

  • Manage Costs Better: Leverage tax breaks to control company expenses.
  • Boost Employee Benefits: Reinvest savings into welfare, from healthcare support to training subsidies.
  • Ensure Full Compliance: Guide your workforce accurately and avoid LHDN penalties.

In short, these incentives help you put more money back into your most valuable asset - your people!

Are you ready to leverage these changes to benefit both your organisation and your team?

This guide explores the income tax relief options, key changes, and the eligibility criteria for accurate payroll and employee guidance. Let's dive in and ensure your team is fully prepared this coming tax season.

In this guide, we’ll talk about:

What Is Tax Relief in Malaysia?

In simple terms, tax relief reduces the portion of income that is subject to tax, thereby lowering the final tax liability. This differs from a tax rebate, which is a direct reduction of the final tax payable.

By maximizing tax relief options, employees can significantly reduce their overall tax rate in Malaysia.

Tax Relief vs. Tax Rebate (Explained Simply)

Definition
Tax Relief Deduction from total income before tax is calculated.
Tax Rebate Deduction from the final tax amount payable.

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New Tax Changes for 2025 (What’s Different This Year)

The 2025 Year of Assessment brings several key updates aimed at improving employee welfare and financial planning. These changes are crucial to note for employee guidance and preparation.

Get ready for the coming tax season! Read our full guide on Malaysia Tax Reliefs 2024 and learn everything you need to know, from YA 2024 rates to filing and claiming process.

Malaysian Income Tax Reliefs Table 2025

The table below provides a structured overview of the main personal tax relief 2025 categories.

Tax Relief Malaysia 2025 Schedule (Full List)

No. Category Relief Amount (RM) Description Notes on Limits & Updates
1 Individual and Dependent 9,000 Relief for an individual in respect of self and dependent relatives. Granted automatically.
2 Disabled Individual 6,000 Additional relief for a taxpayer certified as disabled by the Department of Social Welfare (DSW). Increases to RM7,000 w.e.f. YA 2025.
3 Disabled Spouse 5,000 Additional relief for a taxpayer's disabled husband/wife living together with no or joint income. Increases to RM6,000 w.e.f. YA 2025.
4 Husband / Wife / Alimony 4,000 Deduction for a spouse with no income/electing for joint assessment, OR for alimony payments to a former wife. Limit: RM4,000 or actual alimony paid (whichever is lower). Not allowed if non-disabled spouse earns > RM4,000 from foreign sources.
5 Education Fees (Self) 7,000 Tertiary-level studies (Law, Accounting, Islamic Finance, Technical, etc.) and any skill/qualification recognized by the government. Includes a sub-limit of RM2,000 for up-skilling/self-enhancement courses (extended to YA 2026).
6 Purchase of Breastfeeding Equipment 1,000 For breastfeeding mothers purchasing equipment for a child aged 2 years and below. Claimable only once every two years of assessment.
7 Lifestyle Relief (Core) 2,500 Expenses for reading materials (incl. e-newspapers), computer/smartphone/tablet, internet subscription, and self-improvement courses. Excludes additional warranty fees.
8 Additional Lifestyle Relief (Sports) 1,000 Expenses for sports equipment, rental/entrance fees for sports facilities, competition registration, gym membership, or sports training.
9 Expenses on EV Charging Facilities 2,500 Installation, rental, purchase, or subscription fees of EV charging facilities (not for business use). Effective YA 2024 to YA 2027.
10 Medical Expenses Relief (Self, Spouse, Child) 10,000 Covers serious diseases, fertility treatment (IUI, IVF, etc.), vaccinations (restricted to RM1,000), dental exam/treatment (restricted to RM1,000), complete medical exam, COVID-19 tests, and mental health exam/consultation. Includes a sub-limit for Diagnostic Disability Assessment for children aged 18 and below (Restricted to RM4,000) (w.e.f. YA 2025, restricted to RM6,000).
11 Medical Expenses for Parents 8,000 Medical treatment, dental treatment, special needs, or carer expenses for parents (certified by a medical practitioner). W.e.f. YA 2025, includes grandparents and vaccination (restricted to RM1,000).
12 Purchase of Basic Supporting Equipment 6,000 For basic supporting equipment for the use of self, spouse, children, or parents who are disabled.
13a Children Relief: Unmarried Child < 18 2,000 Per child, unmarried, and below 18 years old.
13b Children Relief: Unmarried Child ≥ 18 2,000 Per child, unmarried, receiving full-time education (A-Level, certificate, pre-university, etc.).
13c Children Relief: Unmarried Child ≥ 18 (Higher Education) 8,000 Per child, unmarried, receiving full-time higher education (Diploma and above in Malaysia, or Degree and above outside Malaysia).
13d Children Relief: Unmarried Disabled Child 6,000 Per child. Increases to RM8,000 w.e.f. YA 2025.
13e Children Relief: Disabled Child (Higher Education) 14,000 Disabled child aged 18 and above enrolled in a full-time professional diploma or higher degree program. Includes the base disabled child relief.
14 Childcare Fees 3,000 Fees paid to registered childcare centres and kindergartens for children aged 6 years and below. Extended to YA 2027. Claimable by the spouse who incurs the expenses.
15 Life Insurance Premiums and EPF 7,000 Combined relief for Life Insurance and EPF contributions. Sub-limits: EPF (Restricted to RM4,000), Life Insurance (Restricted to RM3,000).
16 Net Deposits in SSPN for Child 8,000 Net savings deposited into the National Education Savings Scheme (SSPN). Extended to YA 2027. Claimable by either parent.
17 Insurance Premiums for Education and Medical 3,000 Premiums related to education or medical benefits for self, spouse, or child. Increases to RM4,000 effective YA 2025.
18 SOCSO & EIS Contributions 350 Contributions made to the Social Security Organization (SOCSO) and Employment Insurance System (EIS).
19 Deferred Annuity & Private Retirement Scheme (PRS) 3,000 Contributions to approved deferred annuity plans and the Private Retirement Scheme (PRS). Extended to YA 2030.
20 Housing Loan Interest 5,000 / 7,000 Tax relief for first-time homebuyer on housing loan interest paid for the first 3 consecutive YAs. Effective YA 2025 – 2027. Varies based on property value upon Sale & Purchase Agreement (SPN): RM7,000 (RM500,000 & below) or RM5,000 (RM500,000 – RM750,000).

Always ensure you refer to the official Budget 2025 Announcements on Tax Relief 2025 PDF or the official LHDN Malaysia website for the most current and complete information.

Who Is Eligible for Tax Relief in 2025?

An individual earning income in Malaysia is eligible for tax relief if they fall into one of these categories:

  • Salaried individuals earning an annual income exceeding RM37,333 or a monthly salary of approximately RM3,111 or more, after mandatory EPF deductions.
  • Self-employed individuals, freelancers, and gig economy workers (e.g. e-hailing drivers and food delivery riders) with an income that reaches the taxable threshold as mentioned above.
  • Entrepreneurs or registered business owners in Malaysia who need to file taxes based on their business profits.
  • Anyone registered with the Inland Revenue Board of Malaysia (LHDNM) and has been assigned a tax number, including those without a fixed income or haven’t earned the taxable amount.
Who Is Eligible for Tax Relief in 2025

If you are unsure whether an employee needs to file, you may use the LHDNM's Income Tax Calculator to check their eligibility.

What Types of Income Are Taxable & Exempted?

Here's a direct and simple breakdown of what counts as taxable and non-taxable income for your employees:

Income Type Examples Taxable Exempt
Employment Payroll Salary, bonuses, commissions, fixed allowances ✅
Business Profits Income from self-employment, freelancing ✅
Rental Income Earnings from property rental ✅
Investment Gains Dividends, shares ✅
Capital Gains (Public Equities) Profits from the sale of shares on Bursa Malaysia ✅
Interest (Local Banks) Interest earned from Malaysian banks ✅
Interest (Foreign Banks) Interest from overseas accounts brought into Malaysia ✅
Hibah & Inheritance Money received as inheritance ✅
Gifts Cash or items received as gifts ✅
Certain Government Allowances Special allowances for civil servants ✅

Maintain up-to-date and detailed records of all employee income and expenses throughout the year for accurate annual tax filings and submissions.

Tax Relief Through EPF Contributions and Life Insurance

Employers should note that employees can optimize their personal income tax relief by strategically managing their EPF contributions and life insurance/deferred annuity premiums.

This is a key benefit to communicate as it allows members to leverage these payments for maximum allowable tax deductions.

Tax Relief Limits

For Private Sector Employees & Non-Pensionable Public Servants:

  • EPF Contributions (Voluntary / Mandatory) / Approved Schemes: Up to RM4,000
  • Life Insurance Premium / Voluntary EPF Contributions / Both: RM3,000

Total Tax Relief: Tax relief of up to RM7,000 for EPF contributions and life insurance premiums.

For Pensionable Public Servants

Retired civil servants in Malaysia can now benefit from an expanded tax relief that includes their EPF retirement savings, in addition to the existing life insurance premium relief (capped at RM7,000).

This update encourages them to make voluntary contributions to their EPF accounts to maximize this tax benefit. HR should communicate this opportunity clearly, emphasizing that the RM7,000 relief limit now covers both life insurance premiums and voluntary EPF contributions.

Understanding Tax Relief for EPF Members

Tax Relief via i-Lindung: Insurance/takaful plans purchased through EPF’s i-Lindung platform using Akaun Sejahtera qualify for tax relief under the Life Insurance/Family Takaful category (up to RM3,000 per year).

Even if an employee uses their EPF savings to purchase an insurance/takaful plan, it still qualifies for personal tax relief (subject to LHDNM approval).

EPF Dividends: Dividends earned on EPF savings are not subject to tax, allowing retirement savings to grow tax-free.

How to Claim Tax Relief (Step-by-Step)

To ensure employees can successfully claim their personal tax relief, employers should guide them on the correct filing procedures. Here's a quick overview of the claim process:

How to Claim Tax Relief via MyTax (e-Filing)

  1. Gather Supporting Documents
    Collect and keep all original receipts and proof of eligible expenses, such as education fee receipts, medical bills, or insurance payment statements.
  2. Submit the Tax Return
    File income tax via e-Filing on the LHDN MyTax Malaysia portal or manually submit Form BE.
  3. Declare Tax Reliefs Accurately
    Input the correct figures in the relevant tax relief categories in the e-Filing system under "Tax Reliefs."
  4. Retain Documents for Audit
    Keep all receipts and supporting documents for at least 7 years in case of an audit by LHDN.
  5. Claim Refunds (If Applicable)
    If the total tax paid exceeds the final tax due after deductions and reliefs, there will be a refund from LHDN.
How to claim tax relief via Mytax (E-filing)

Common Mistakes to Avoid When Claiming Tax Relief

To ensure LHDN compliance and avoid hefty fines or penalties (and potential HR queries), you should be aware of these common mistakes when claiming personal income tax relief.

  1. Documentation: Failure to keep receipts for 7 years and overstating claims as well as using receipts or invoices that do not contain the claimant's name.
  2. Information Accuracy: Double-claiming between spouses in the same expense category (especially if filing separately), claiming ineligible expenses, or using outdated relief limits.
  3. Income Omission: Understating or omitting any source of taxable income.

Simplify LHDN Tax Compliance in Malaysia

Stop risking costly errors with manual tax calculations! As your team grows, so does the chance of making mistakes—that's a lot of pressure for any HR leaders in Malaysia.

QuickHR, an LHDN-approved HRMS software, automates and streamlines the entire tax calculation, filing, and submission process for all your payroll needs.

  • Regularly updated with the latest LHDN/PCB rates and regulations for full compliance.
  • Seamlessly integrates with other statutory deductions like EPF, SOCSO, and EIS, providing full payroll compliance in Malaysia – all in one system.
  • Generate all necessary reports and documentation for compliance and auditing.

Need seamless 2025 tax calculations? Try QuickHR Payroll Malaysia today and simplify it all.

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