Budget 2025: New & Updated Tax Incentives For Individuals (2024)

Budget 2025 has been tabled by Prime Minister Dato’ Seri Anwar Ibrahim with the largest-ever allocation of RM421 billion. It is the third “Belanjawan MADANI” with three key focus points: improving the economy, generate change, and to prosper the rakyat.

As with every national budget, this year’s proposed Budget will see various new tax-related initiatives as well as updates to existing incentives for individuals and businesses. In this article, we’ve compiled all of the relevant tax-related announcements for individuals in Budget 2025.

New 2% dividend tax for individuals with >RM100,000 annual dividend income

The MADANI government is focused on expanding its tax revenue without burdening the masses, and the dividend tax is one such example. In his speech, Dato’ Seri Anwar stated that this tax will only affect those with millions of Ringgit in shareholdings, and will widen the tax base to also cover individuals who are not salary earners.

At the same time, the government is considering how wide the definition of “dividend income” should be – in the Budget speech appendices, it is noted that dividend income derived from government savings such as EPF, PNB funds such as Amanah Saham Bumiputera (ASB) and Amanah Saham Malaysia, unit trust funds, and dividend income from overseas (which are usually already taxed) are all exempt from this tax.

Increased tax relief for medical and education insurance premiums

One of a few changes to medical-related tax reliefs, this will see the individual tax relief for medical and education insurance premiums increased from RM3,000 currently to RM4,000 from YA 2025.

No further elaboration was made during the Budget 2025 presentation, but it is highly likely another incentive to drive medical insurance coverage among Malaysians, where it is estimated that 42% of Malaysians are not covered by medical insurance. It may also be an initiative to retain medical insurance coverage among policyholders, where in recent years the cost of medical insurance premiums have been skyrocketing.

Expanded medical tax relief coverage

In another sign of rising healthcare costs, this tax relief has been enhanced for the third Budget in a row – in Budget 2023 this relief was increased from RM8,000 to RM10,000 and in Budget 2024, dental examination and treatment expenses were included for up to RM1,000.

In Budget 2025, this relief will be further expanded specifically for the RM1,000 limited relief for full medical check-up, medical health check-up or consultation, and Covid-19 test kits, where it will now cover:

• Full medical check-up
• Mental health check-up or consultation
• Purchase of self-test kit (eg Covid-19 and influenza test kit)
• Purchase of self-testing medical devices (eg glucometer, pulse oximeter, blood pressure monitor, thermometer)
• Fees for disease detection examination conducted at a clinic or hospital, such as blood tests, ultrasound, mammogram, and pap smear

On top of that, the Prime Minister also stated that for medical insurance policyholders who opted for a co-payment plan can claim medical tax relief for the portion borne by the individual.

As before, this relief can be claimed for expenses made for yourself, your spouse, or your child.

SSPN tax relief extended to YA 2027

A favourite among taxpayers and a potential omission in Budget 2024 that saw public outcry, the RM8,000 tax relief for SSPN net savings for the individual’s children has been extended for another three years.

PRS & deferred annuity payments tax relief extended to YA 2030

Another taxpayer favourite, any concerns about PRS tax reliefs being removed have been cleared for the next six years of assessment. This relief, which covers deferred annuity payments and deposits made to Private Retirement Schemes (PRS), covers up to RM3,000.

New tax relief for first-time homeowners

To encourage first-time home ownerships and increase disposable income, the government has proposed up to RM7,000 in tax relief on mortgage interest payments per year, for YA 2025-2027. The claimable amount is broken down as follows:

• Up to RM7,000 for properties priced up to RM500,000
• Up to RM5,000 for properties priced between RM500,000 to RM750,000

It is also important to note that this is only applicable to properties whose sales and purchase agreements are executed from 1 January 2025 to 31 December 2027, and that the property is not used to generate any income.

Enhanced tax relief for disabled individuals

In an effort to ease the burden of disabled individuals, the proposed tax relief for the disabled has been enhanced as follows:

• Increased tax relief from RM6,000 to RM7,000 for disabled individual taxpayer
• Increased tax relief from RM5,000 to RM6,000 for an individual taxpayer with a disabled spouse
• Increased tax relief from RM6,000 to RM8,000 for an individual taxpayer with unmarried disabled children

Nursery & kindergarten fees tax relief extended to YA 2027

To continuously assist parents in obtaining childcare and early education services for children, it is proposed the individual income tax relief of up to RM3,000 be extended for 3 years.

Expanded EV charger tax relief to include purchase of home composting machine

To encourage food waste recycling at home, the government is proposing to expand the scope of relief for EV charging equipment to include the purchase of food waste composting machines for household use. The relief limit remains at RM2,500 and is only claimable once within 3 years of assessment.

Expanded tax relief for continuous well-being, welfare, and elderly care

This relief covers a number of different existing tax reliefs, with the main focus on expanding the scope of relief to cover expenses made to parents and grandparents.

For example, for the scope of tax relief for sports activities, health, and medical care to be expanded as follows:

• individual income tax relief of up to RM1,000 for expenses on sports equipment and activities for self, spouse and child be expanded to parents;
• full medical check-up expenses for parents, limited to RM1,000 be expanded to include vaccination;
• medical treatment, special needs, and parental care expenses be expanded to grandparents as follows:
  • medical treatment at clinics and hospitals;
  • treatment and homecare nursing, day care centres and residential care centres;
  • dental treatment not including cosmetic dental treatment; and
  • full medical check-up and vaccination, limited to RM1,000

*****

The third MADANI Budget continues to strike a balance between increasing revenue without burdening the wellbeing of its rakyat. This can be clearly seen in the list of new and expanded tax reliefs list shared above, where higher allocations are given to areas such as medical and health-related expenses – but introducing a new dividend tax that will affect a small number of individuals who should be able to afford it.

Regardless, there will be “winners and losers” in every Budget, and we hope you have a better understanding of what’s in store for you as individual taxpayers come YA 2025. If you’d like to know more about the other major highlights from Budget 2025, check out our article here!

• TAGS:
• Belanjawan Madani
• Dato' Seri Anwar Ibrahim
• Tax Relief