Malaysia Income Tax Rates and Brackets for YA 2027: Proposed Changes and Calculations

Budget 2027, announced on 9 October 2026, proposes increasing basic individual relief from RM 9,000 to RM 12,000 and cutting two resident tax rates. It would also move the top-rate threshold down.

These are proposals. They take effect only once enacted and reflected in LHDN's guidance. The Ministry of Finance's tax-measures annex sets YA 2027 as the start for the rate and basic-relief changes.

There are two ways to measure what changes for you: hold chargeable income the same and compare the rates alone, or let the larger basic relief reduce chargeable income as well. This guide works through both, and keeps them apart so you don't count the same saving twice.

Source: PMO Budget 2027 speech, MOF tax-measures annex (as of 13 October 2026)

Malaysia YA 2027 income tax bracket table (proposed)

Each row is a slice of chargeable income, and only the amount inside that slice is taxed at its marginal rate. The schedule below is for an ordinary resident individual. Special tax regimes and non-residents are treated differently.

Source: MOF tax-measures annex, Appendix 1 (as of 13 October 2026)

Crossing a threshold doesn't reprice the income below it. If your chargeable income rises slightly into the next row, only the extra amount is taxed at the higher rate.

A one-percentage-point cut changes the rate on one slice of income only, which is different from cutting your whole annual tax bill by 1%.

Proposed YA 2027 rate changes and RM 12,000 basic relief, with thresholds.

YA 2027 vs YA 2026: complete rate comparison

The table below uses the same income boundaries in both columns, which means splitting some existing rows so you can see exactly where the rates diverge. The LHDN public schedule is still labelled YA 2023–2025. MOF's October annex identifies the same rates as the current position, and the 2026 MTD specification provides the payroll baseline.

Source: LHDN resident schedule, LHDN 2026 MTD specification, MOF tax-measures annex (as of 13 October 2026)

The assessment year matters too. If you're a typical individual on the calendar-year basis, income year and filing year line up like this. LHDN announces exact filing dates each year.

Source: LHDN individual income-tax introduction, MOF proposed YA 2027 commencement (as of 13 October 2026)

So the return you file during 2027 is still a YA 2026 return, and the proposed brackets don't apply to your 2026 earnings. If you keep a tax spreadsheet that carries last year's inputs forward, label each estimate with its assessment year.

How progressive income tax is calculated

Start with the right income figure, then work through the bands. Reliefs reduce the income the schedule applies to. Qualifying rebates reduce the tax you calculate, while PCB, also called monthly tax deduction or MTD, is tax you've already paid through payroll.

The calculation has three stages. First, multiply each slice of chargeable income by its rate and add them up: that's tax before rebates. Second, subtract any valid rebates. Third, deduct PCB and other payments to get your balance. A negative balance usually means you've overpaid, once everything is reconciled.

For example, RM 120,000 of chargeable income produces proposed tax of RM 13,900. The marginal rate is 24%, but RM 13,900 divided by RM 120,000 is about 11.58%. Applying 24% to the whole amount would give RM 28,800, more than twice the correct figure.

When you compare effective rates, say what you divided by. Tax as a share of chargeable income is a different number from tax as a share of gross pay.

Worked examples: rate changes only, holding chargeable income constant

Use this first method when you already know your chargeable income and want to see the effect of the rate changes alone. Put the same amount through both schedules. The examples assume ordinary resident treatment and leave out rebates, PCB and any change in reliefs.

At RM 120,000, the first RM 70,000 costs RM 3,700 under either schedule. The proposed calculation adds RM 30,000 × 18% = RM 5,400, then RM 20,000 × 24% = RM 4,800. Together: RM 3,700 + RM 5,400 + RM 4,800 = RM 13,900. The baseline uses RM 5,700 and RM 5,000 for those two slices, giving RM 14,400.

At RM 1.2 million, proposed tax on the first RM 1 million is RM 247,600. The remaining RM 200,000 is taxed at 30%, adding RM 60,000. That outweighs the RM 800 saved in the lower bands, so the final bill is RM 3,200 higher. Bringing the top band forward can raise tax for high earners even while two lower bands are cut.

At this scale the two total-tax curves nearly overlap, so the lower panel plots the difference on its own. It holds chargeable income constant and includes no basic-relief saving.

Baseline and proposed tax from RM 0 to RM 1.5 million, with a rate-only difference panel.

These figures are annual tax liabilities before rebates. Any tax you've already paid through the year comes off later, at the reconciliation stage.

Worked examples: higher basic relief plus proposed rates

Use the second method when you want to start from the same total income before personal relief. Deduct the baseline basic relief in one column and the proposed basic relief in the other, then apply each schedule to the resulting chargeable income. This method already includes the relief change.

The examples assume no other reliefs, deductions, rebates or adjustments. In practice, your allowances, benefits, expenses and family circumstances will change the starting figure.

For RM 90,000 total income, the proposed chargeable amount is RM 78,000. Tax is RM 3,700 on the first RM 70,000 plus RM 8,000 × 18%, or RM 5,140. The baseline amount is RM 81,000, giving RM 3,700 + RM 11,000 × 19% = RM 5,790. The difference is RM 650.

This RM 650 already contains the rate saving, so don't add the first method's result on top. To see the two parts, apply the proposed rates to the baseline RM 81,000 chargeable amount: RM 5,680. That's RM 110 saved from the rates alone. Reducing chargeable income to RM 78,000 then saves another RM 540, and RM 110 + RM 540 = RM 650.

A fair policy comparison holds everything else constant, including income, residency and rebates. Your actual tax can still rise from one year to the next if your salary goes up.

RM 90,000 example: RM 110 rate saving plus RM 540 relief saving.

Personal income tax relief changes announced for YA 2027

The package changes what several relief categories cover and how they're grouped. Appendices 3–7 set out the detailed relief conditions; the figures below summarise the proposal. A subcap sits inside its category cap, so the two don't add together.

Increase to RM 12,000 basic individual relief

The extra RM 3,000 reduces chargeable income; it isn't RM 3,000 back in your pocket. What it saves depends on which slices of income it removes from the calculation. If those slices were already taxed at 0%, it saves nothing.

Medical care: postpartum services

Proposed health/wellbeing cap: RM 10,000; postnatal care through a confinement centre or qualified individual: RM 3,000 subcap. Breastfeeding equipment for children aged two or younger, paid by self/spouse: RM 1,000 subcap, merged into this category.

Keep provider and payment receipts together. Because breastfeeding equipment now sits inside this category, each expense is claimed once here, even if an older guide still shows it as its own row.

Parents and grandparents: broader care expenses

Proposed cap: RM 8,000. Home/day/residential care extends beyond medical care. Receipts plus a carer declaration/work permit support claims; self/spouse/children cannot be the carer. The proposal removes medical certification for this care claim.

Keep a record of who provided the care and what you paid. Without it, a payment to a family member can look like an ordinary contribution to household costs.

Sports shoes and eligible sports expenses

Proposed sports cap: RM 1,000, including shoes up to RM 300. The shoes limit is a subcap.

Keep receipts split by type of purchase, so the final rules are easy to apply if a single receipt mixes eligible and ineligible items.

Education, skills courses and children's tuition

Proposed cap: RM 7,000. Your eligible certificate, diploma, bachelor's, master's or doctoral studies can cover any field, with regulatory recognition, at recognised Malaysian institutions or professional bodies. TVET for self/spouse: RM 3,000 subcap, recognised under Act 652. Other non-work courses for self/spouse, or children's STEM/arts/language/religion courses/tuition: RM 2,000 subcap. Lifestyle course relief merges here.

Check that the course and provider qualify, not just the invoice description. Keep running totals for the main category and each subcap, especially when different family members take different kinds of classes.

Lifestyle: AI subscriptions and specified pet expenses

Proposed cap remains RM 2,500. Additions: personal-use AI subscriptions for self/spouse/child; adoption from registered shelters; registered veterinary vaccination/spaying/neutering. General pet expenses are not all included.

Keep subscription invoices and provider details. The new items apply from YA 2027, so a purchase made in 2026 can't be claimed under them.

Tourism entrance fees and SOCSO contributions

The RM 1,000 relief for tourist-attraction and cultural entrance fees, currently available for YA 2026 only, would be extended for YA 2027. SOCSO relief stays at RM 350 for mandatory contributions, including those under the LINDUNG KENDIRI scheme for self-employed people in three sectors, and a further RM 150 is proposed for voluntary LINDUNG 24 Jam contributions and LINDUNG KENDIRI contributions in the 17 sectors where it isn't mandatory.

What about non-resident taxpayers in YA 2027?

Tax residency is set by the tax rules, not your passport. LHDN's non-resident guidance lists 30% for employment, business and rental income, with different treatment for other sources. Its individual tax introduction says non-residents do not receive personal reliefs.

That means the resident comparisons in this guide don't apply to non-residents, even though the top rate is the same 30%. Withholding tax, exemptions and tax treaties can all change the picture. Confirm your residency and the type of income first, then check the final YA 2027 position before filing.

Will PCB/MTD deductions change in 2027?

Employers calculate payroll deductions using LHDN's MTD schedule or approved computerised calculation method. Any change to your monthly deduction will come through LHDN's 2027 payroll update and your employer's payroll system, not directly from the Budget annex.

If more is deducted than your final liability, you get a refund. For example, if your reconciled annual tax were RM 5,140 and you'd paid RM 6,000, you'd be RM 860 in credit. Your annual figure needs to include rebates and other adjustments first, and timing of the refund depends on LHDN processing.

Who benefits, who may pay more and who sees little change?

The table compares the two schedules at the same chargeable income, with no rebates, so it shows the rate effect alone. The relief changes can add to the saving.

On rates alone, the saving reaches RM 800 at RM 150,000 and stays there up to RM 1 million. Beyond that, each extra ringgit up to RM 2 million adds two sen to the difference. The two schedules produce the same tax at RM 1.04 million, and above that the proposed tax is higher. Once relief changes are included, that crossover point moves.

How to estimate your tax liability correctly

Decide which comparison you want before entering numbers. The worksheet below lets you record both methods side by side, so the basic relief isn't deducted twice. It's a planning aid, not an official LHDN form.

Worksheet for the two comparison methods, with fields for calculations and assumptions.

1. Confirm your residency status for the year before choosing a schedule.
2. Work out your 2027 income from each taxable source, keeping gross earnings separate from the total-income figure.
3. Deduct the reliefs allowed under the final rules. For planning, mark any proposed amount clearly.
4. Apply each marginal band only to its own slice of chargeable income and add the tax amounts.
5. Subtract valid rebates, then reconcile PCB or other payments to find the remaining balance.

To measure the policy impact, compare the same income figure in both columns and note your assumptions. A salary figure in one column and chargeable income in the other won't give a meaningful result.

Date your estimate. Before filing or adjusting payroll, rerun it with the final legal schedule and LHDN instructions, since the enacted measures may differ from the proposal.

FAQs

1. What are Malaysia's income tax brackets for 2027?

The proposed resident bands are in the first table above, applied to chargeable income. They are Budget proposals until enacted, so check the final schedule before filing.

2. Is the new RM 12,000 tax relief effective in 2026?

No. The annex proposes it from YA 2027, so it doesn't apply to your YA 2026 calculation even though the Budget was announced in 2026.

3. What changed from 19% to 18%?

The marginal rate on the RM 70,001–100,000 slice falls by one percentage point. At RM 80,000 chargeable income, only RM 10,000 falls in that slice, which gives the RM 100 rate-only saving shown above.

4. Is the 24% rate applied to my entire salary?

No. It applies only to chargeable income between RM 100,001 and RM 150,000, and lower slices keep their own rates. RM 120,000 chargeable income produces proposed tax of RM 13,900 before rebates, not RM 28,800.

5. What happens at RM 150,001 chargeable income?

Only the ringgit above RM 150,000 enters the next band, and the first RM 150,000 is taxed as before. Using unrounded arithmetic, proposed tax becomes RM 21,100.25 before rebates.

6. Does the 30% tax rate now start at RM 1 million?

That's the proposed threshold: 30% would apply to chargeable income above RM 1 million. Until the change is enacted, the current threshold of RM 2 million still stands.

7. How much will someone earning RM 90,000 save?

RM 650 in our example, which assumes the same total income in both years, only basic relief and no rebates or other adjustments. Your own saving depends on your actual chargeable income.

8. How much does RM 12,000 basic relief save?

It reduces your income base, so the saving is much smaller than RM 12,000. In the RM 90,000 example, the extra relief saves RM 540 at the proposed rates, and the rate changes save another RM 110.

9. How are tax rebates different from reliefs?

Reliefs reduce chargeable income before the rates are applied. Rebates come off the tax you've calculated, under their own qualifying rules. PCB is different again: it's tax you've already paid.

10. Are high earners paying more under the new schedule?

Some would. On rates alone, RM 1.2 million chargeable income produces RM 3,200 more proposed tax. The final effect depends on how much income sits above RM 1 million and any changes in reliefs.

11. Does Budget 2027 affect e-Filing in 2027 for YA 2026?

No. These proposals are for YA 2027. The return you file in 2027 covers 2026 income, so it uses the YA 2026 rules.

12. Do non-residents receive the RM 12,000 relief?

No. Personal reliefs are for residents only. Check your residency status and income source first, then the rules for that year.

13. When will LHDN publish final YA 2027 rates?

LHDN hasn't announced a date yet. Watch its official rate, return and payroll guidance once the measures pass through Parliament.

14. Can I claim AI subscriptions as lifestyle relief immediately?

No. The proposed addition is for YA 2027, so it can't be used on your YA 2026 return. Keep your receipts and check the enacted rules before you claim.

15. Are the Budget 2027 tax proposals already law?

Not yet. The speech and annex announce the measures and their intended start date, but they still need to be legislated and reflected in LHDN guidance.