Updated: 28 March 2025
When you file your personal income taxes, a main section of your form will be devoted to declaring the income you earn. This can be as simple as simply checking the figure on your EA form and filling it in. But when things like additional allowances and benefits come into play, it may seem a little more complicated.
What counts as “income from employment?”
Statutory income from employment refers to not only your monthly salary, but also any commission, bonus, allowances, perquisites, benefits-in-kind, and even accommodation. Of course, there are certain types of income within this list that do not have to be included in your income for tax purposes – in other words, income that is exempted from tax. If you are given a tax exemption up to a certain value, you don’t have to include that amount in your declaration of income.
Perquisites, benefits-in-kind, and tax exemptions
A perquisite is a perk or benefit given to you by your employer, like travel and medical allowances. Benefits-in-kind are also a type of benefit received by employees which are not included in their salary, such as cars, furniture, and personal drivers. Regardless of what they’re called, you have to keep track of the additional benefits given to you because they may either be taxable or tax-exempt. Here is a list of perquisites and benefits-in-kind that you can exclude from your employment income.
*These tax exemptions are not applicable for directors of controlled companies, sole proprietors, and partnerships.
What happens if you need to declare a benefit-in-kind as part of your employment income? You can’t exactly put down “one car and one driver” on your form as part of your income, so you’ll have to prescribe it a monetary value in order to be taxed. This can be done through the formula method or the prescribed method. If you would like to know more about these methods of calculation, PwC offers a good explanation in its Malaysian Tax Booklet.
Other tax exemptions and sources of income
You are required to pay taxes for your income arising from any rent received. Interest earned from the following institutions, meanwhile, are tax exempt: licensed banks, Islamic banks, or finance companies, developed financial institutions, Lembaga Tabung Haji, the Malaysia Building Society Berhad (MBSB), and the Borneo Housing Finance Berhad. Dividends received from exempt accounts of companies, cooperative societies, and approved unit trusts are also exempt from tax.
Women returning from the workforce are eligible for income tax exemption under TalentCorp’s Career Comeback Programme if they were away from the workforce for at least two years. This is applicable until YA 2028.
Other tax exemptions you may take advantage of are:
- Compensation for loss of employment
- Death gratuities
- Income derived from research findings (50% exemption)
- Pensions after the age of retirement or ill health
- Retirement gratuity after the compulsory age of retirement after 10 years of continuous service or ill health
- Scholarships
Don’t overpay your taxes
Malaysia operates on a self-assessment system when it comes to income tax, so the taxpayer is responsible for calculating their own chargeable income and payable tax. That’s why you need to be aware of which parts of your income is taxable or exempt. Hopefully, this article has helped highlight some tax exemptions you weren’t aware of before so you can file your taxes more accurately.
If you have any questions, do let us know in the comments! You can also check out our annual income tax guide for 2025 (YA 2024).
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