Country: Malaysia
State: Not applicable
Compliance category: Income Tax
Regulatory Information:
Regulation: Finance Act 2024 (the Act’)
Act/Notification/Circular No: Act 862
Notification date: December 31, 2024
Updates in Compliance:
Summary:
Royal Assent received for the budget proposals announcement in Budget 2025 and published in the gazette on December 31, 2024. The summary of the payroll related changes in alignment with the Act elucidated in the Monthly Tax Deduction (MTD) specifications 2025 have been tabled below:
Effective Date: January 01, 2025
1) Changes in Tax Reliefs:
| S.No. | Mandatory/Optional Deductions | Individual Limit (in RM) | Overall Limit (in RM) |
Coverage |
| 1 | Self | – | No change | |
| 2 | Disabled Self | – | 7,000 | |
| 3 | Disabled Spouse | – | 6,000 | |
| 4 | Disabled -Unmarried Child &<18 years | – | 8,000 | |
| 5 | Disabled-Un married & >18 age pursuing higher education at diploma level in MY or full-time instructions at degree level outside Or serving under the articles or indentures with a view to qualify in trace or profession in Malaysia |
– | 16,000 | |
| 6 | a) Medical expenses on serious illness of self, spouse or child b) Self or spouse undergoing fertility treatment. |
No change | No change | |
| c) Vaccination for self, spouse and child | No change | |||
| d) Complete Medical examination / COVID / Mental Health examination. | No change | Coverage includes the following: 1. Purchase of self-testing medical devices, as specified 2. Fees for disease detection examination conducted at clinic or hospital, as specified |
||
| e) Child<18 years at any time in basis year and if individual spent or deemed to spend on specific diagnosis on learning disability. | 6,000 | |||
| f) Inspection and dental treatment expenses | No change | |||
| 7 | Amount spent on purchase of sports equipment for self/spouse/child | – | No change | Includes expenses incurred on sports equipment and activities for parents |
| 8 | a) Medical care and treatment by nursing home, special needs or carer expenses incurred for Parents | No change | No change | Includes expenses on medical treatment, special needs, care incurred for grandparents |
| b) Medical examination for parents | No change | No change | Includes expense incurred on vaccination for parents and grandparents | |
| 9 | Childcare and Kindergarten fees for child of 6 years and belowreceived by employees or paid directly by employers to childcare centers | – | No change | Extended till assessment year 2027 from 2025 |
| 10 | Private Retirement Scheme or deferred annuity | – | No change | Extended till AY 2030 from 2025 |
| 11 | Education and Medical Insurance for self, spouse and child. |
– | 4,000 | |
| 12 | Amount deposited for child into Skim Simpanan Pendidikan Nasional (SSPN) | – | No change | Extended till the AY 2027 from 2024 |
| 13 | Expense for purchase of domestic food waste composting machine and electric vehicle equipment | – | 2,500 | 1. The relief for expenses incurred on electric vehicle charging equipment includes expensefor purchase of domestic food waste composting machine 2. Extended till AY 2027 from 2025 |
| 14 | Housing loan Interest on first residential home of price up to RM 5,00,000 | – | 7,000 | 1. The house purchased should not be used to generate income 2. The sales and purchase agreement must be executed from January 01, 2025, until December 31,2027 3. Applicable for 3 consecutive years of assessment, commencing from the first year the housing loan interest is paid 4. Two or more individuals can apportion and claim relief on interest payment |
| 15 | Housing loan Interest on first residential home of price > RM 5,00,000 and up to RM 7,50,000 | – | 5,000 |
2) Changes in Tax Forms –
• Changes in TP1 form: In section C related to “Deduction information” of Form TP1 following changes are insisted based on the tax relief limit and criteria amendment:
| Row | Change | Assessment year 2025 | Assessment year 2024 |
| C1 | Change in description as this relief extends to grandparents | Perbelanjaan untuk ibu bapa/datuk nenek | Perbelanjaan untuk ibu bapa |
| C1 (C) | Change in description as this relief includes Vaccination cost | Pemeriksaan perubatan penuh termasuk kos pemvaksinan | Pemeriksaan perubatan penuh termasuk kos pemvaksinan |
| C4 (e) | Inclusion in the description | Fi bayaran ujian pengesanan penyakit dan pembelian peralatan pemeriksaan Kesihatan kendiri | NA |
| C4 (f) | Revision of tax relief limit | RM 6,000 | RM 4,000 |
| C6 | Inclusion of term extended to grandparents | Ibu bapa | NA |
| C13 | Revision of tax relief limit | RM 4,000 | RM 3,000 |
| C15 | Inclusion of term | Pembelian mesin kompos sisa makanan bagi kegunaan isi rumah (Terhad Sekali setiap 3 tahun taksiran) | NA |
| C16 | Introduction of new tax relief on Housing loan interest on first home. | Bayaran faedah pinjaman rumah kediaman pertama (perlu penuhi syarat kelayakan) | Not Applicable |
• Changes in TP3 form: In section D of Form TP3 the following changes are insisted based on the tax relief limit and criteria amendment:
| Row | Change | Assessment year 2025 | Assessment year 2024 |
| D1 | Change in description as this relief extends to grandparents | Perbelanjaan untuk ibu bapa/datuk nenek | Perbelanjaan untuk ibu bapa |
| D1 (C) | Change in description as this relief includes Vaccination cost | Pemeriksaan perubatan penuh termasuk kos pemvaksinan | Pemeriksaan perubatan penuh termasuk kos pemvaksinan |
| D4 (e) | Inclusion in the description | Fi bayaran ujian pengesanan penyakit dan pembelian peralatan pemeriksaan Kesihatan kendiri | NA |
| D4 (f) | Revision of tax relief limit | RM 6,000 | RM 4,000 |
| D6 | Inclusion of term as this relief is extended to grandparents | ibu bapa | NA |
| D13 | Revision of tax relief limit | RM 4,000 | RM 3,000 |
| D15 | Inclusion of term | pembelian mesin kompos sisa makanan bagi kegunaan isi rumah (Terhad Sekali setiap 3 tahun taksiran) | NA |
| D16 | Introduction of new tax relief on Housing loan interest on first home. | Bayaran faedah pinjaman rumah kediaman pertama (perlu penuhi syarat kelayakan) | Not Applicable |
• Changes in MTD Text File: The changes pertaining to Transaction record (Details) section have been brought in and tabled below:
| Row | Change | Assessment year 2025 | Assessment year 2024 |
| 11 | Change in description | Tax Identification Number (TIN) | Income Tax No. |
| 11 | Change in length | 11 | 10 |
Deletion of “Row 12” under Transaction record (Details) related to “Wife code”.
Our Analysis:
The middle-income group benefits significantly from the higher tax relief limits and the expanded coverage for medical and sports initiatives aimed at improving public health.
Furthermore, the tax relief on housing loan interest for first-time homebuyers and for purchase of eco-friendly equipment encourage individuals to make impactful investments, which, in turn, contribute to overall economic growth.
The report changes have been aligned to the above changes.
