Updated: 28 March 2025

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 do 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 allowances/perquisites are for official duties*
Childcare subsidies / allowances	Up to RM3,000*
Parking fees / allowances	Fully exempted*
Meal allowances	Fully exempted*
Interest on loan subsidies	Loan totalling RM300,000 for housing / vehicles, and education*
Income tax borne by employer	Tax amount paid by employer
Award	Total amount paid by employer: Exemption available up to RM2,000 for following types of award:* – long service (more than 10 years of employment) – past achievement – service excellence, innovation, or productivity award
Leave passages	3 local leave passages including fares, meals, and accommodations OR 1 overseas leave passage up to RM3,000 for fares only
Medical benefits (including traditional medicine and maternity expenses)	Fully exempted
Telephone (including mobile telephone), telephone bills, pager, personal data assistant, and broadband subscription	Fully exempted, limited to 1 unit for each asset
Exemption for mobile phones, laptops, and tablets, provided by employers to employees (Flexible Work Arrangement Incentive)	Up to RM5,000
Company goods provided free or at a discount to employee, spouse, or unmarried children	Up to RM1,000
Company services provided free or at a discount to employee, spouse, or unmarried children	Amount of discount or amount of services provided free

*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. Interest earned from the following institutions, meanwhile, 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. This is applicable until YA 2028.

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! You can also check out our annual income tax guide for 2025 (YA 2024).

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• Filing Income Tax
• Income Tax
• Income Tax Exemptions
• Longform
• Tax Exemptions