Tax Exemptions: What Part Of Your Income Is Taxable?

Are travel allowances, medical allowances, and other benefits taxable in Malaysia? Find out what to include in your income declaration when filing taxes in 2019.

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 does 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.

Perquisite/Benefit-in-kind Tax Exemption Limit (per year)
Petrol, travel, toll allowances Up to RM6,000. If the amount exceeds RM6,000, further deductions can be made in respect of amount spent for official duties.
Parking allowance, including parking rate paid by employer directly Actual amount expended
Meal allowance received on a regular basis Actual amount expended
Medical benefits (including traditional medicine and maternity expenses) Actual amount expended
Child care allowance for children up to 12 years old Up to RM2,400.
Benefit, whether in money or otherwise, for past achievements, service excellence, or long service award, etc Up to RM2,000.
Gift of fixed line telephone, mobile phone, etc registered in employee’s name Limited to 1 unit for each asset
Monthly bills for phone or broadband line registered in employee’s name Limited to 1 line for each category of asset
Company goods provided free or at a discount to employee, spouse, or unmarried children Up to RM1,000
Company goods provided free or at a discount to employee, spouse, or unmarried children Amount of discount or amount of services provided free
Subsidised interest for housing, education, or car loan Fully exempted if total loan amount does not exceed RM300,000. For exceeding amounts, there is a calculation formula that you can find in the explanatory notes to the BE form.
Leave passage (vacation time paid for by employer) Exempted up to 3x in a year for leave passage within Malaysia (fares, meals, accommodation) and 1x outside Malaysia (up to RM3,000 for fares only)

*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, but there is a 50% tax exemption in this category for Malaysian resident individuals. The exemption is limited to RM2,000 per month for each residential home rented out, and the residential home must be rented under a legal tenancy agreement. Also, the exemption is given for a maximum of three consecutive years.

Interest earned from the following institutions 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.

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!

More on Malaysia income tax 2019

Find more income tax related content in our Income Tax page.

0 comments

Agree or disagree with this post? Questions? You also have your word!

  • Vicknesh

    Hi I have sold my company stocks awarded to me in 2017 as Restricted Stock Units with 1 year vesting period. These were sold in the New York Stock Exchange this year and the proceeds were transferred to my personal Bank account in Malaysia in Feb 2019. Is this money tax exempted or in need to pay taxes on them in 2018?

    Reply
    • RinggitPlus

      Hi, Vickesh

      It depends on LHDN's discretion as it is hard for us to find any form of tax treatment regarding stock exchange on LHDN's website. It is in your best interest to contact LHDN for this matter.

      Thanks for the question and we hope this helps.

      Reply
    • Pauline Thoo

      Can you please clarify on the rental income? How do one calculate rental income ie deduct loan interest, assessment, quit rent? What else can be deducted?

      Reply
    • Poh Kuan

      Refer to the link you provide https://www.liew.my/usr/pagesub2.aspx?pgid=264, it stated that "Property Loan Interest" is part of deductible expense. Is it true that we can declare this in 2018 for deduction?

      Reply
      • RinggitPlus

        Hi, Poh Kuan

        Based on what we know so far, the calculation still remains the same regardless of the YA of Assessment. However, we would encourage you to contact LHDN for more information on this matter.

        Thanks for the question and we hope this helps.

        Reply
      • Pat

        If i am receiving car allowance of rm700 per month, is it taxable?

        Reply
      • ELANGOVAN

        Hi Poh Kuan,

        Does the 50% exemption on rental income applies to rental of above RM2000 per mth. Ie if I receive rental of RM2,500 per month can I get exemption for upto RM2000.
        For lifestyle relief, mobile plans with internet is included. Eg if I have RM128 package mobile plan with internet & calls, can claim relief for the amount of RM128x12mths?

        Thank you and look forward for your response.

        Elango

        Reply
        • RinggitPlus

          Hi, ELANGOVAN

          Mobile plans are not tax deductible as the internet plan in LHDN's list of tax relief refers to the broadband plan.

          Thanks for the question and we hope this helps.

          Reply
        • Victor

          Does none tax resident do enjoy the house rental 50% exemption as well?

          Reply
          • RinggitPlus

            HI, Victor

            The 50% rental tax exemption is not applicable to non-residents.

            Thanks for the question and we hope this helps.

            Reply
          • Rachel

            My company gives travel reimbursement and wellness reimbursement, are these taxes exempted? If yes, if receipt is required for those?

            Reply
            • RinggitPlus

              Hi, Rachel

              Travel allowance is tax-exempted and yes, you need to produce the receipt.

              Thanks for the question and we hope this helps.

              Reply
            • Agnes

              Is car allowance tax exemption?

              Reply
            • Phoebe

              Hi, is monthly travel allowance tax exemption? because there is no receipt and pay by company monthly with salary.

              Reply
              • TLP

                1) As mention from the above, how do i differential what type of car allowance is taxable, what is not taxable? If i received a monthly fixed amount said RM500 paid together with salary, is this taxable?
                2) for rental income, if rental income below RM2000 there is 50% tax exemption. Is this amount net off with expenses incurred, means RM2000 rental income minus all the expenses related, 50% tax exemption based on the balance?
                Thank you.

                Reply
                • Ee

                  Hi, good afternoon. May I know a retired government servant receiving 2 pension from JPA is it taxable or eligible for tax exemption? 1) ownself 2) late husband, deceased.
                  About deduction for internet subscription is it possible to claim for sub-lines under sponse and children?
                  Thank you.

                  Reply
                  • Ivy

                    If the staff purchase company products for own consume at staff price, the amount discounted is it consider tax exempted?

                    Reply
                    • May

                      Hi ,is monthly car park payment exempted

                      Reply
                      • Jim

                        Hi Ringgitplus,
                        I noted that you mention Compensation for loss of employment is tax exempted. I lost my job in the company and the company paid me compensation under the Voluntary Separation Scheme (VSS). However i was asked to go to LHDN to file this and LHDN actually deducted a portion of the compensation before authorising my ex-company to release the payment to me. Do you have any reference to the document which i can use to argue this case with them?

                        Reply
                        • Eng

                          Hi, i collected rental totalling RM8,400.00. Means i can get deduction 50% (ie RM4,200). With the net of RM4,200 can i still deduct the maintenance fee, sinking fund, quit rent & assessment.
                          Thank you

                          Reply
                          • Emalie Lee alwis

                            Hi, I am currently working and reaching age of 56 and will be receiving my retirement benefit of 200k. However in 2013 the company was taken over by a bank n the RB was kept in a investment fund n I was given interest on it. I m still continuing to work with them until age 60.. I was working in this company for the last 30 years...is my RB taxable now? Your advise pls... pls note that my RB was fix in yr 2013..therefore I m not paid last drawn salary.. hope u could help me clarify this issue..tks

                            Reply
                            • PL

                              Hi Ringgitplus, now only i aware the parking allowances is tax exempted. My employer include the parking allowances into monthly salary payment (which means deduct the epf & pcb). in such case, can i still exempt it when i filling income tax? Appreciate your response.

                              Reply
                              • sara

                                Hi , meaning our bonuses, our ad hoc travel claim, our dental claim all are exempted ? tq

                                Reply