The government is studying a new way to decide who gets welfare aid, and it could eventually replace the B40, M40, and T20 labels we’ve grown used to. Instead of looking at your household’s income before deductions, the proposed measure focuses on your Net Disposable Income (NDI), the money your household has left after mandatory deductions and essential living expenses.

The Economy Ministry said the current income groups will stay in use for now, but a fairer method is needed so that struggling families do not miss out on aid just because their salary looks high on paper. The government is aiming to roll this out under the Thirteenth Malaysia Plan, which covers 2026 to 2030, and is talking to agencies about possible pilot projects.

How Net Disposable Income Works

NDI is worked out in two steps. First, add up your household’s gross income, which is everyone’s income before deductions. Then subtract mandatory deductions like EPF, SOCSO, income tax, and zakat. What is left is the money that reaches your family’s bank accounts each month.

Second, remove what your family must spend on essentials, like food, rent, transport, and utility bills. Whatever remains is your NDI, which reflects how much your household has left after meeting its basic expenses. The measure would also consider living costs in your area, so a family in Kuala Lumpur would not be judged by the same cost assumptions as a family in Kelantan.

One big question is still open, though. The government has not said whether essential spending will be based on what each family reports, or on a standard benchmark for each area.

How The B40, M40, And T20 Labels Are Worked Out

Right now, households are grouped into B40, M40, and T20 based on gross household income. The labels use your whole household’s income, not one person’s salary. For example, if you earn RM4,000 and your spouse earns RM4,000, your household income is RM8,000. The combined figure is what determines your household’s income group.

These labels are also rankings, not fixed salary bands. Line up all Malaysian households from lowest income to highest, and the bottom 40% are B40, the middle 40% are M40, and the top 20% are T20. Because they are rankings, the cutoff points rise as incomes across the country rise. Your family could stay in the same group even after a pay rise, simply because everyone else’s pay went up too.

The Cutoff Points Keep Climbing

The Statistics Department tracks these groups through a national survey series that is carried out at least twice every five years, and the results are used to update the income cutoffs. The latest round, the Household Income and Expenditure Survey (HIES) 2024, was published in October 2025 and raised the T20 entry point to RM12,680 a month, up from RM11,820 in 2022.

At the very top, the richest 1% of households (called T1) now start above RM40,195 a month, and include families earning RM100,000 and more.

The Same Salary Buys Less In The City

Gross income says nothing about what life costs where you live. A family earning RM8,000 in the Klang Valley pays city rent, tolls, parking, and childcare. A family earning RM8,000 in a smaller town pays far less for all of these, so the city family can feel squeezed on the same salary.

The table below shows how NDI would treat them differently. The numbers below are not official. They are an example of how the calculation could work once the government decides how to measure essential spending. Both families start with RM8,000 gross and lose about RM1,100 to EPF, SOCSO, and monthly tax deductions, leaving RM6,900. The difference comes in what they must spend to get through the month.

	Family in the Klang Valley	Family in a smaller town
Income after deductions	RM6,900	RM6,900
Essential spending	RM5,600	RM3,900
Net Disposable Income	RM1,300	RM3,000

Both families would fall into the same income group today, so both are treated the same way when aid is handed out. Under NDI, they would look different. The city family could become eligible for help it currently misses, while the family with low living costs and more left over each month might no longer qualify automatically.

What You Can Do For Now

B40, M40, and T20 still decide eligibility for current aid programmes like STR and SARA, and any change is only targeted within the Thirteenth Malaysia Plan period. Based on HIES 2024, B40 households earn up to RM5,859 a month, M40 households earn between RM5,860 and RM12,679, and T20 starts at RM12,680. Add up the monthly income of everyone in your household and compare it against these cutoffs to know which income group your household is placed in. 

It also helps to keep your income records updated with LHDN, and to update your details on portals like MySTR whenever they open for revisions. If the government does switch to measuring what families have left instead of what they earn, up-to-date records could make the transition smoother for your household.

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