What Is Chargeable Income in Malaysia? Formula, Tax Brackets and Examples (YA 2027)

Malaysia's ordinary resident income tax starts with a 0% band on the first RM 5,000 of chargeable income. Chargeable income is what's left after income adjustments and personal reliefs, so it is a different number from your annual salary, your take-home pay and your final tax bill.

This guide explains chargeable income in Malaysia for YA 2027, meaning income for the 2027 calendar year, ordinarily filed in 2028. It works through two salary examples and shows where rebates and Potongan Cukai Bulanan (PCB), or monthly tax deduction, come into the calculation.

The YA 2027 figures here follow Budget 2027 proposals: a RM 12,000 basic relief and lower rates on two middle bands, set out in the Ministry of Finance's tax-measures annex. They apply once Parliament passes the Finance Bill. Start by pinning down the year and your tax residence, then work through each stage in order.

Income tax calculation formula in Malaysia

For a straightforward resident individual, you calculate total income first, deduct eligible personal reliefs, then apply the tax bands. HASiL's Public Ruling 5/2022 describes the sequence from source income to chargeable income.

The simplified formulas are:

Chargeable income = total income less eligible personal reliefs

Tax before rebates = tax calculated across applicable income bands

Tax after rebates = calculated tax less qualifying rebates

Balance payable = tax after rebates less PCB and permitted payments

Total income already reflects source adjustments and allowable deductions, so it is not simply the sum of every credit in your bank account. Businesses, losses, approved donations, joint assessment and income under special tax rules each have their own statutory treatment.

A positive final balance means you owe more tax. A negative balance, where permitted payments exceed your tax liability, is an overpayment that HASiL reconciles. An unused rebate on its own doesn't create one.

Keeping income deductions and tax payments in their own stages stops you deducting the same item twice.

The calculation moves from income to chargeable income, then from computed tax to the final payment balance.

Gross income vs taxable income vs chargeable income vs tax payable

Each stage does a different job. People use taxable income loosely in conversation, but when you prepare a return, use the form's own labels. The glossary below follows the Income Tax Act's calculation framework.

Source: HASiL Public Ruling 5/2022, Income Tax Act 1967 (as of 2 November 2026)

Gross remuneration can include amounts that are exempt, so classify your receipts before settling on the taxable starting figure. In a simple salary case, several of the intermediate figures may come out the same. The differences start to matter once you add a second income source or claim a deduction before personal reliefs.

Net salary is the money you receive after payroll deductions. Your bank balance and EPF account value are snapshots of assets, not measures of this year's taxable earnings. Loans, transfers between your own accounts and reimbursements also land as bank credits, and they need classifying before you count any of them as income.

Which income sources count?

Start with a list of everything you received, then work out each item's source and tax treatment. HASiL lists employment, business, rent, royalties, dividends, interest and pensions among income categories. Whether an item is included depends on the exemption and calculation rules for it.

Employment salary, bonuses, allowances and taxable benefits

Salary and bonuses generally count as employment income. Include taxable commissions and benefits shown in your employer's EA statement, and check any allowance described as exempt against the exemption's conditions, since the label "allowance" doesn't decide its treatment.

Reconcile your EA statement with your payslips, especially if you changed employers. The amount that reaches your bank account has already had EPF, PCB and other deductions taken off, so using it as gross pay understates your starting figure.

Freelance, gig and sole-proprietorship business profits

Regular freelance work or a sole proprietorship can be business income even as a side activity. Calculate that source under the business rules first, then add the resulting statutory income to your other sources.

Keep invoices and expense evidence together. Splitting personal purchases from work costs early makes your claim easier to support later. The self-employed section below shows why turnover and chargeable income can be far apart.

Rental income and allowed deductions

Rent counts alongside salary, but gross rent and taxable rental income are different figures. HASiL's computation ruling explains deductible expenses incurred in producing a source's income, and what qualifies depends on the expense and your rental circumstances.

Owning a rented property doesn't make the whole housing-loan repayment deductible. Split financing and property costs by their tax treatment, and keep the tenancy agreement. Refurbishment, private use and periods without tenants can all affect what you can claim.

Dividends, interest and foreign-source income

Investment receipts need classifying before they join the ordinary salary calculation. Interest on eligible Malaysian bank deposits received by a resident individual is exempt under the deposit-interest exemption in Schedule 6. Interest from other sources, such as private loans, needs its own check.

Not all company dividends are exempt. The individual dividend-income rules have their own threshold, deductions and allocation method, and relevant dividend income goes through a special computation instead of being taxed at your salary's marginal rate. Keep dividend vouchers, and keep company dividends apart from unit trust distributions.

For foreign income received in Malaysia during 2027, the resident-individual exemption has qualifying conditions, including the foreign-tax condition and a partnership-income exclusion. The guideline sets out when that foreign-tax condition is treated as met. Work you perform in Malaysia stays Malaysian-source income even if the customer is abroad or pays into an overseas account.

Pensions, royalties and other periodic receipts

Pensions, royalties and annuities are income categories, but specific exemptions can apply. Work out what each payment is and whether its exemption conditions are met before including it. For a retirement payment, for example, you may need details of the former employment, the scheme and the circumstances of retirement.

Keep the payer's statement even if you conclude the receipt is exempt. It shows why that amount was treated differently from salary.

How personal tax reliefs reduce chargeable income

For YA 2027, Budget 2027 proposes raising the basic deduction for an eligible resident individual to RM 12,000 for the individual and dependent relatives, up from RM 9,000. It reduces the income you're taxed on, which is worth much less than a RM 12,000 cut to your tax bill.

Other reliefs have their own eligibility tests and caps, and the main contribution ceilings carry on unchanged into YA 2027. The current TP1 notes set allocated ceilings of RM 4,000 for qualifying EPF or approved contributions and RM 3,000 for qualifying life insurance, family takaful or additional voluntary EPF contributions. Your claim is capped at those ceilings even if payroll deducted more, and each contribution can only be claimed once.

Education and medical insurance keeps its own RM 4,000 ceiling. Education fees, health spending and children fall into their own categories with extra conditions, and several of those categories gain new items under the Budget 2027 proposals. Claim the amount your records support, up to the limit, and check the YA 2027 return notes when they're published.

LHDN is asking buyers to request e-invoices for relief purchases by giving the seller their identification number or tax identification number (TIN). Its pilot can use e-invoice data to pre-fill YA 2026 returns for categories such as computers and smartphones, lifestyle purchases, insurance and childcare fees. Asking for e-invoices on 2027 relief purchases gives you a second record for your worksheet.

A relief saves tax at the rate of the band it removes. For example, if an extra RM 1,000 of relief falls entirely in the 6% band, your tax falls by RM 60. If the deduction straddles a band boundary, calculate each part at its own rate.

Rebates come later. A qualifying resident individual with chargeable income not exceeding RM 35,000 can receive a RM 400 individual rebate, and Budget 2027 doesn't propose changing it. Spouse-related rebates have their own conditions. Qualifying zakat is also a rebate, limited by the rules and by your tax liability. Excess rebate is neither refunded nor carried forward; overpaid PCB is a different matter.

Malaysia's resident tax bands for YA 2027 (proposed)

These ordinary resident bands come from Appendix 1 of the Budget 2027 tax-measures annex. Compared with today's schedule, the 70,001 to 100,000 band falls to 18%, a new 24% band covers 100,001 to 150,000, and 30% starts above RM 1 million. Our YA 2027 tax rates guide compares the old and new schedules band by band.

Source: MOF Budget 2027 tax-measures annex, Appendix 1 (as of 2 November 2026)

Each rate applies only to its own slice, so moving into a higher band leaves the tax on your earlier income unchanged. Special regimes and dividend computations sit outside this table.

Payroll works differently. PCB for 2027 will follow LHDN's 2027 MTD schedule once it is published; the 2026 MTD specification still uses the current bands, and its formula constants build rebates into the lower bands. Those constants are for estimating PCB, so use the slice method here for the annual calculation.

Worked example with RM 60,000 annual salary

Say you're a resident with RM 60,000 taxable salary in 2027, no other income and no source deductions. Your reliefs are RM 12,000 basic relief, RM 4,000 qualifying EPF relief and RM 2,000 other supported reliefs, RM 18,000 in all.

Chargeable income is RM 60,000 − RM 18,000 = RM 42,000. The first RM 5,000 is taxed at 0%. The next RM 15,000 at 1% gives RM 150, and the following RM 15,000 at 3% gives RM 450. The remaining RM 7,000 at 6% gives RM 420.

Tax before rebates totals RM 0 + RM 150 + RM 450 + RM 420 = RM 1,020. Chargeable income is above the individual-rebate threshold of RM 35,000, so the RM 400 rebate doesn't apply. With no other rebates or credits, RM 1,200 of PCB leaves a RM 180 overpayment, which is an estimated refund due once HASiL processes the return.

Reliefs and payments do different jobs here. Paying more PCB changes the settlement balance; your chargeable income stays the same.

Two YA 2027 salary examples comparing gross income, RM 18,000 reliefs, chargeable income and tax before PCB.

Worked example with RM 120,000 salary and taxable bonus

Now assume salary plus taxable bonus totals RM 120,000, with the same RM 18,000 of eligible reliefs and no other adjustments. Chargeable income is RM 102,000. Under the proposed YA 2027 schedule, tax on the first RM 100,000 is RM 0 + RM 150 + RM 450 + RM 900 + RM 2,200 + RM 5,400 = RM 9,100.

Only the next RM 2,000 falls in the 24% band, adding RM 480. Total tax before rebates and PCB is RM 9,580. Any qualifying rebates or credits come off next, followed by the year's actual payments.

The marginal rate is 24% on the top slice. The effective rate on gross income is RM 9,580 ÷ RM 120,000 = 7.98%, or about 9.39% if you divide by chargeable income instead. When you compare effective rates, say which denominator you used.

Multiplying the whole gross salary by 24% gives the wrong answer, because each band is taxed at its own rate.

Tax on RM 102,000 chargeable income built from progressive slices, totalling RM 9,580.

A YA 2026 return, filed in 2027 for 2026 income, still uses current law: RM 9,000 basic relief, 19% on RM 70,001 to 100,000 and 25% from RM 100,001 to RM 400,000. On those rules, the same two salaries give chargeable income of RM 45,000 and RM 105,000, and tax of RM 1,200 and RM 10,650.

What changes if you are self-employed?

Your starting figure is business income, with allowable source deductions taken off before personal reliefs. Section 33 and the related business deduction rules separate income-producing expenses from private or capital spending, which you can't deduct.

For example, RM 80,000 revenue less RM 20,000 allowable operating expenses leaves RM 60,000 adjusted income. Assuming no capital allowances, losses or other adjustments, that becomes total income, and with RM 18,000 of qualifying personal reliefs, chargeable income is RM 42,000. Equipment purchases or losses add more steps.

A resident carrying on business generally files e-B, which also covers employment income, instead of e-BE. Keep business records and review any CP500 instalment obligations. Instalments are tax payments that get reconciled against your final bill; they are not business expenses or reliefs.

What changes if you are a non-resident?

Tax residence depends on the statutory residence tests, not citizenship. A foreign citizen can be resident, and a Malaysian citizen can be non-resident for a given year. Days of presence and the connected-year tests decide it.

HASiL's non-resident guidance shows 30% for common income categories including employment and business, with no resident individual reliefs, so the RM 12,000 basic relief doesn't apply. Other income, withholding provisions, treaty terms and exemptions can differ. Being paid in ringgit doesn't make the resident examples apply to you.

How to check chargeable income inside MyTax

Build your own worksheet before entering figures in the correct year's e-Filing form through MyTax. Review income sources, total income, reliefs, chargeable income, tax computed, rebates and payments, in that order.

A reconciliation worksheet for checking the figures before submitting a YA 2027 return.

Match employment entries to each EA statement and compare PCB with your payment records. If any relief figures arrive pre-filled from e-invoices, check each one against your receipts. Check the return's chargeable income against your worksheet; if they differ, find the stage where the figures first split. Preview the return before submitting and keep the acknowledgement.

Returns filed during 2027 are for YA 2026. For 2027 income, select YA 2027 when that return opens in 2028. LHDN's 2026 filing programme set 30 April for e-BE and 30 June for e-B, with 15 days' grace for e-filing, and LHDN normally publishes each year's programme early in that year. Confirm the dates for your return when they're announced.

Status of the YA 2027 figures

As of 2 November 2026, the RM 12,000 basic relief and the new rate schedule are Budget 2027 proposals. They take legal effect once the Finance Bill is passed, and LHDN then reflects them in the 2027 payroll tables and the YA 2027 return. If the enacted figures differ, rerun the examples with the final schedule.

FAQs

1. What is chargeable income in Malaysia?

It is the amount left after the required income calculations and eligible personal reliefs. Tax rates are then applied to that amount, with special treatment for some types of income.

2. Is chargeable income the same as gross income?

No. Gross income comes earlier, before deductions and reliefs, so your chargeable income can be much lower.

3. Is EPF deduction before or after income tax?

Before. Eligible EPF relief is deducted when working out chargeable income. Because relief is capped, your payroll EPF deduction and your relief claim can be different amounts.

4. Are bonuses taxable?

Yes, employment bonuses are generally taxable. Include the bonus in that year's employment income and reconcile it with your employer's statement.

5. Does RM 12,000 basic relief mean RM 12,000 lower tax?

No. It reduces the income used to calculate tax, so the saving depends on which bands the relief removes. In the RM 60,000 example, the RM 12,000 sits within a RM 18,000 relief total that brings chargeable income down to RM 42,000.

6. Does rental income count?

Yes. Taxable rental income is added to your other sources after permitted rental deductions, and only qualifying property expenses can be deducted.

7. Are bank savings interest and ASB distributions taxable?

Interest on eligible Malaysian bank deposits is exempt for a resident individual. A qualifying exempt ASB distribution is also excluded from chargeable income, and the fund's current tax statement shows which parts are exempt. The unit trust rules distinguish taxable and exempt components.

8. Why is PCB different from final tax payable?

PCB collects an estimate of your tax through the year. The final calculation uses your actual income, supported claims and payments, so you may still owe a balance or be due a refund.

9. How do I calculate marginal vs effective rate?

Your marginal rate is the rate on your highest taxable slice. For an effective rate, divide your tax by an income measure, and say whether you used gross or chargeable income.

10. How is freelancers' chargeable income calculated?

Work out statutory business income after allowable source adjustments, then add your other sources. Permitted deductions and personal reliefs come off before tax is calculated.

11. Is chargeable income different for foreigners?

It depends on residence, not nationality. A foreign individual who is tax resident gets resident treatment, while a non-resident normally pays different rates without resident personal reliefs.

12. Are the YA 2027 rates and RM 12,000 relief final?

Not yet. The Budget 2027 tax-measures annex proposes them from YA 2027, and they still need to pass in the Finance Bill. The YA 2026 return you file in 2027 keeps the RM 9,000 relief and current bands.

Check the calculation before you file

Build your calculation from income sources, claim only the deductions and reliefs you qualify for, and reconcile tax payments last. Keep the worksheet with your supporting statements so every figure has an explanation. Before filing in 2028, read the final YA 2027 return notes against your own circumstances.