KUALA LUMPUR, Oct 16 — How much will you be able to save in taxes in Malaysia, based on the proposed new income tax rates and individual tax relief in Budget 2027?
But first, very quickly, take a look at how the government proposes to change the income tax rate from 2027 onwards:
The main changes include reducing the tax rate for the chargeable income band of RM70,001 to RM100,000 from 19 per cent to 18 per cent, and reducing it for the RM100,001 to RM150,000 band from 25 per cent to 24 per cent.
What it means for you in ringgit and sen
To calculate how much tax you will be paying, take your total income in 2027, and then subtract the tax reliefs you will claim, which leaves you with the “chargeable income”.
Since Malaysia uses a progressive tax system, the tax you have to pay will be based on the different tax rates for the different income bands in your overall chargeable income, instead of one flat tax rate for your entire chargeable income.
So based on the proposed new tax rates for 2027, you could save RM300 or RM800 in tax, if your chargeable income is for example RM100,000 or RM150,000.
If your chargeable income is RM2 million, you will have to pay RM19,200 more in taxes, as the higher tax rate of 30 per cent is proposed to kick in earlier when the chargeable income exceeds RM1 million.
On Deloitte Malaysia’s website, its tax leader Sim Kwang Gek in her Budget 2027 commentary noted that the proposed 30 per cent tax rate (starting from above RM1 million instead of only to above RM2 million) appears aimed at partially offsetting the lesser revenue from middle-income taxpayers due to their lower tax rates, while ensuring higher-income taxpayers contribute more to the government’s overall tax revenue.
“The proposal therefore reinforces the progressive nature of Malaysia’s personal income tax system by shifting part of the tax burden towards those with a greater ability to pay,” she said.
Wait, there’s more: Taxpayers could save up to RM1,600 when lower tax rates are combined with higher tax relief
The individual tax relief, which is automatically given to taxpayers, will be raised from RM9,000 to RM12,000 from tax assessment year 2027 onwards. (This is the first time it has been raised since 2010).
That means you will automatically see an additional RM3,000 being deducted from your chargeable income, which ultimately means you will be paying less tax.
Here’s what this means, based on our own calculations using hypothetical figures for illustration purposes and also Deloitte’s examples:
• You will pay RM840 less in tax
(If your chargeable income would have been RM100,000 based on the RM9,000 tax relief figure, but it was pushed down to RM97,000 based on the RM12,000 tax relief figure. And also based on the proposed lower tax rate of 18 per cent for RM70,001-RM100,000 band, as compared to the current higher tax rate of 19 per cent for this band.)
• You will pay RM1,520 less in tax
(If your chargeable income is reduced from RM150,000 to become RM147,000, due to higher tax relief of RM12,000. Lower tax also due to proposed lower tax rates for the chargeable income bands RM70,001-RM100,000 (18 per cent) and RM100,001-RM150,000 (24 per cent), as compared to current tax rates.)
That’s more cash in your pocket, or more disposable income left for you to spend, save or invest.
So this is why Prime Minister Datuk Seri Anwar Ibrahim said in his Budget 2027 speech that the combined effect of the higher tax relief and lower income tax rates would give an additional disposable income of up to RM1,600 to approximately five million taxpayers.
Of course, this is before factoring all the other tax reliefs you may be claiming, so the total tax you would be paying could be even lesser.
Do remember that all these proposed new income tax rates and higher tax relief is for tax assessment year 2027 and onwards, which means they are expected to only apply to the income you get in the year 2027 and the years after that.