Budget 2025 expanded several existing reliefs, introduced a new housing loan interest relief for first-time homebuyers, and added a 2% tax on dividend income above RM100,000.
If you’re in the midst of filing, it’s worth going through the changes before you submit, especially with the new dividend tax in the mix.
Housing Loan Interest Relief Is Back
Good news for first-time homebuyers! For the first time since Budget 2009, you can now claim a tax relief on your housing loan interest payments.
If your Sale and Purchase Agreement (SPA) was signed between 1 January 2025 and 31 December 2027, here’s what you can claim:
The relief is claimable for up to 3 consecutive years of assessment, starting from the year you first pay the housing loan interest. If 2 individuals jointly own the property, both can claim based on the proportion of interest each person pays.
Do note that properties above RM750,000 do not qualify, and any property used to generate rental income is excluded. The full conditions are outlined in Appendix 7 of the Budget 2025 Tax Measures document.
Changes To Existing Tax Reliefs
Education and Medical Insurance Relief Goes Up to RM4,000
The annual cap on education and medical insurance premiums has been increased from RM3,000 to RM4,000. The tax relief applies to conventional insurance premiums and Takaful contributions for policies covering yourself, your spouse, or your children, including medical cards, hospitalisation and critical illness plans, as well as group medical insurance where you pay the premiums. Riders attached to life policies also qualify, although only 60% of bundled critical illness rider premiums are claimable.
For education insurance, your child must be the named beneficiary. If you’ve been maxing out the old limit, the additional RM1,000 gives you room to top up or broaden coverage without losing out on tax relief.
Learning Disabilities Medical Relief Now Up to RM6,000
For parents claiming medical expenses related to children with learning disabilities such as Autism, ADHD, or Down Syndrome, the sub-limit for assessment, diagnosis, and early intervention has been raised from RM4,000 to RM6,000. The total medical expenses relief remains capped at RM10,000, which also covers serious illnesses, fertility treatments, full medical check-ups, vaccinations, dental treatment, and mental health consultations.
Sports Relief Now Covers Your Parents Too
The RM1,000 sports relief has been expanded to include expenses incurred for your parents who are residents in Malaysia. The full list of claimable expenses under this relief is:
- Purchase of sports equipment (rackets, balls, home gym gear, and similar)
- Rental or entry fees for sports facilities (badminton courts, swimming pools, bowling centres)
- Gym membership fees
- Registration fees for sports competitions, where the organiser is approved and licensed by the Commissioner of Sports
- Sports training fees from associations or clubs registered with the Sports Commissioner or Companies Commission of Malaysia
From YA 2025, all of the above can be claimed for expenses incurred on behalf of your parents, in addition to yourself, your spouse, and your children.
Disabled Person Relief Gets a Bump Across All Categories
The fixed tax relief amounts for persons with disabilities (OKU) registered with the Department of Social Welfare (JKM) have all been increased for YA 2025. This is a fixed deduction, so you don’t need to show expense receipts, just proof of JKM registration.
A New Relief For Food Waste Composting Machines
The existing hire-purchase and EV equipment relief (up to RM2,500) has been expanded to include household food waste composting machines, which are countertop or home appliances that break down kitchen scraps into compost.
The relief is claimable once every 3 years, from YA 2025 to YA 2027, and only applies to machines purchased for non-business, household use. A niche addition, but worth knowing if you’ve recently purchased one.
Reliefs That Have Been Extended
These reliefs aren’t new, but they’ve been renewed, so make sure you’re still claiming them:
A New 2% Tax On Dividend Income Above RM100,000
Effective from YA 2025, a 2% tax applies to dividend income from resident Malaysian companies that exceed RM100,000 per year, for both resident and non-resident individual shareholders. The first RM100,000 remains tax-free.
The following dividends are exempt from this tax:
- Dividends from foreign-sourced income
- Dividends from companies with pioneer status or reinvestment allowances
- Dividends from shipping companies already exempted from tax
If you’re receiving more than RM100,000 in local dividends annually, whether directly, through a substantial equity portfolio, or via nominee holdings, this is worth reviewing with a tax professional before you file. Full technical details are in Appendix 10 of the Budget 2025 Tax Measures document.
Other Changes Worth Knowing
The elderly care allowance that employers can provide tax-free has been expanded. Previously, the exemption only covered childcare for children aged 12 and below. From YA 2025, it also covers elderly care for employees’ parents or grandparents. If your employer offers this benefit and you’re caring for ageing parents, check whether it’s been updated in your company’s handbook.
On the EPF front, mandatory contributions for non-Malaysian employees are being phased in. This won’t directly affect most individual Malaysian taxpayers, but employers with foreign staff should be factoring in the additional cost.
Resident individuals also continue to be exempt from tax on foreign-sourced income received in Malaysia, as long as that income was already taxed in the country of origin. This exemption has been extended to 2036.
Quick Summary: What Changed for YA 2025
For the full official list of YA 2025 tax reliefs, refer to LHDN’s Tax Reliefs page.
Before You File
Tax reliefs only count when you’ve actually incurred the expense within the calendar year, so for YA 2025, that means spending between 1 January and 31 December 2025. Keep your receipts, insurance statements, and any supporting documents. In a tax audit, the LHDN may request these, and missing receipts can result in the tax relief being disallowed and penalties of up to 100% of the tax underpaid.
If you’re unsure how any of these changes apply to your situation, particularly around the dividend tax or the housing loan relief, it’s worth consulting a licensed tax agent or financial planner before submitting.
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e-Filing for YA 2025 opened on 1 March 2026 via LHDN’s MyTax portal. The deadline for salaried individuals (Form BE) is 30 April 2026, with a grace period until 15 May 2026 for e-Filing. Business income earners (Form B) have until 30 June 2026, with a grace period until 15 July 2026.
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The post Income Tax Relief Malaysia: What’s New For YA 2025? appeared first on RinggitPlus.
