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 Income | Calculations (RM) | Rate % | Tax(RM) |
|---|---|---|---|
| 0 - 5,000 | On the First 2,500 | 0 | 0 |
| 5,001 - 20,000 | On the First 5,000 | 1 | 0 |
| Next 15,000 | 150 | ||
| 20,001 - 35,000 | On the First 20,000 | 3 | 150 |
| Next 15,000 | 450 | ||
| 35,001 - 50,000 | On the First 35,000 | 6 | 600 |
| Next 15,000 | 900 | ||
| 50,001 - 70,000 | On the First 50,000 | 11 | 1,500 |
| Next 20,000 | 2,200 | ||
| 70,001 - 100,000 | On the First 70,000 | 19 | 3,700 |
| Next 30,000 | 5,700 | ||
| 100,001 - 250,000 | On the First 100,000 | 25 | 9,400 |
| Next 300,000 | 75,000 | ||
| 250,001 - 400,000 | On the First 400,000 | 26 | 84,400 |
| Next 200,000 | 52,000 | ||
| 400,001 - 600,000 | On the First 600,000 | 28 | 136,400 |
| Next 1,400,000 | 392,000 | ||
| Exceeding 2,000,000 | On the First 2,000,000 | 30 | 528,400 |
| 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 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.
