Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim has proposed some changes to the income tax rates under the new Budget 2023. Designed to increase the disposable income for the M40 group, this proposed amendment will see reduced tax rates of 2% while increasing the upper income levels by 0.5%.

As an update to the previous Budget’s proposal last year, this new proposal looks to expand the tax rate to cover a wider income bracket, now including the RM35,001 to RM50,000 bracket. The table below summarises the proposed changes:

Chargeable income (RM)	Current income tax rate	New income tax rate
35,001 – 50,000	8%	6%
50,001 – 70,000	13%	11%
70,001 – 100,000	21%	19%

This proposal will effectively increase the disposable income of the M40 group in Malaysia, which has often been disregarded as the focus tends to be on the B40 and hardcore poor communities who are more exposed to financial shocks. However, with the M40 group hit extremely hard in the past few years with the pandemic as well as higher cost of living, this proposed amendment will result in additional disposable income of up to RM1,300 this year. A total of 2.4 million taxpayers are expected to benefit from this amendment.

In addition, the income tax rate for the T20 Malaysians will be increased by 0.5% to 2% depending on income brackets, to make up for the reduction in the lower income groups. No specifics were shared at the moment, with the Prime Minister only stating that the changes will affect those with chargeable incomes from RM100,000 to RM1,000,000, which are currently taxed at rates from 24% to 26%.

This change is expected to affect some 150,000 Malaysians. Nevertheless, given that Malaysia’s employs a progressive income tax system, those who earn above RM100,000 will still get the reduced tax rates for the RM35,001 to RM100,000 brackets.

• TAGS:
• Income Tax
• M40
• T20