Income Tax Brackets Explained (And How Much You Have To Pay)

Income Tax Brackets Explained (And How Much You Have To Pay)

There’s a running joke that just like a majority of the western world, Malaysia also has four seasons. But instead of the seasons being summer, winter, autumn and spring, in Malaysia we have the tax season, haze season, durian season, and the monsoon season.

One of those seasons; the tax season is now upon us, and we’re here to help you navigate this harrowing season successfully. How? We’re going to explain just how the tax income brackets work, and just how much you have to pay in your taxes.

Explaining income tax brackets

The first mistake people make is asking which tax bracket they fall into. In reality, your income is likely to cross several tax brackets – all of which apply one after another.

To begin, here’s a table of the income tax brackets for the year of assessment 2023 (tax filed in 2024).

Chargeable IncomeCalculations (RM)Rate %Tax(RM)
0 - 5,000On the First 2,50000
5,001 - 20,000On the First 5,00010
Next 15,000150
20,001 - 35,000On the First 20,0003150
Next 15,000450
35,001 - 50,000On the First 35,0006600
Next 15,000900
50,001 - 70,000On the First 50,000111,500
Next 20,0002,200
70,001 - 100,000On the First 70,000193,700
Next 30,0005,700
100,001 - 250,000On the First 100,000259,400
Next 300,00075,000
250,001 - 400,000On the First 400,0002684,400
Next 200,00052,000
400,001 - 600,000On the First 600,00028136,400
Next 1,400,000392,000
Exceeding 2,000,000On the First 2,000,00030528,400
Next ringgit---

As you can see from this table, the rate at which you will be taxed is determined by how much chargeable income you make annually. These tax brackets are imposing on a progressive scale. Which means that you won’t be charged a 13% income tax rate if you earn RM70,000 a year.

How your actual tax rate is calculated

Your income is divided up first – and each section is taxed at a different rate. For example:

Your annual income is RM50,000 a year.

The first RM5,000 you earned is not taxable – you pay nothing.

Next RM15,000 you earned is taxed at 1%, so you pay RM150.

The next RM15,000 is taxed at 3%, so you pay RM450 for this bracket.

The next RM15,000 is taxed at 8%, so you pay RM1,200 for this bracket.

So the total tax you pay is RM150 + RM450 + RM1,200 = RM1,800.

This is lower than if you were just taxed 8% on the whole RM50,000 (which would be RM4,000).

The table above simplifies the calculation by giving you the total amount of taxes in the brackets before your highest bracket (because you are taxed the maximum amount in those brackets). This is what it means when it says “On the first XXXXX amount”.

Determining your chargeable income

So how exactly do you calculate your chargeable income?

Your chargeable income is total annual income, minus all your applicable tax relief and tax deductions.

Here’s an example to help you visualize it;

From this image, you can see that Ash’s total annual income (which means the salary from his job plus any other money he earned in the year) is RM84,300. But what’s his chargeable income?

Here’s Ash’s chargeable income;

So as you can see from this mini infographic, Ash falls into Category E in the income tax bracket. For Category E, he will be taxed 13% of his chargeable income for the first RM50,000, and another 13% for the next RM20,000, which means that he needs to pay RM6500 in taxes for this year.

Use our Malaysia LHDN eFiling guide and income tax calculator

So there you have it, a breakdown of all the tax income brackets, and how to find out where you belong to in the tax income brackets.

Still have questions about income tax? Why not check out our complete and comprehensive income tax guide or use the iMoney income tax calculator to find out how much you need to pay.

iMoney income tax calculator

This article has been updated on April 25, 2024.

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