Malaysia's proposed Budget 2027 raises basic individual tax relief from RM9,000 to RM12,000 and cuts rates in two income bands. The government is directing the changes toward middle-income taxpayers, including the M40.
KPMG Malaysia head of tax Soh Lian Seng estimated the measures could provide up to RM1,600 in added disposable income for roughly five million taxpayers. That is an estimate, not a guaranteed payment; the actual savings depend on income and eligible claims.
Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim tabled the budget on Friday, Oct 10. He said the basic-relief limit was being revised for the first time since 2010.
Resident taxpayers can claim a broader set of expenses
The expanded relief categories cover medical, family-care, sports, education and lifestyle expenses. Postnatal care services would qualify under medical relief. Care expenses for parents and grandparents would no longer be limited to health-related costs.
Sports-related relief would include sports shoes. Education and skills relief would extend to all fields of study and tuition fees for children. The lifestyle category would add artificial intelligence subscriptions, vaccination costs and adopting pets from registered centres.
These provisions reduce taxable income for taxpayers eligible to claim them. They do not provide the same direct benefit to everyone. Fomca chief executive officer Dr T. Saravanan warned that people who do not pay income tax, or already have a low tax liability, may receive little or no direct benefit.
The lower rates cover two chargeable-income bands
Deputy Finance Minister Liew Chin Tong set out the resident-taxpayer income bands in a written reply in the Dewan Rakyat. The proposed cuts are one percentage point in each band.
| Chargeable income | Proposed rate | Current rate |
|---|---|---|
| RM70,001 to RM100,000 | 18 per cent | 19 per cent |
| RM100,001 to RM150,000 | 24 per cent | 25 per cent |
The existing 25 per cent rate applies to taxable income between RM100,001 and RM400,000.
Tax relief can leave low-liability households with little benefit
Soh called the increased relief a practical way to return money to taxpayers. He said middle-income households can miss some targeted assistance while still facing pressure from household expenses and rising living costs.
PwC Malaysia tax partner Michelle Chuo described the increase as timely amid cost-of-living pressures. She said higher-income taxpayers' savings from the relief could be partly offset by the higher top rate and the lower threshold at which it applies. Chuo said the policy directs more of the net tax benefits toward middle-income taxpayers while preserving progressivity.
Saravanan said household budgets can be absorbed by “housing loans or rental payments, vehicle instalments, childcare, school expenses, healthcare, medical insurance premiums and the cost of caring for elderly parents.” Some households earn above the B40 threshold yet have limited disposable income after essential commitments, he said. Fomca called for clear information and practical examples showing how the revised relief and rates would affect people at different income levels.
Economist Dr Geoffrey Williams, founder and director of Williams Business Consultancy Sdn Bhd, estimated that the measures could put RM8 billion, or 0.4% of GDP, back into taxpayers' pockets. He put the average at about RM130 a month. Taxpayers claim relief when they file returns, so the effect may not be immediate.
“So, it is a significant injection potentially. Whether people notice it is another question”
Williams said people needed to “see it in their wallets or cash in hand” and “know they're better off and spend it.”
Other budget measures add cash, fuel and household support
Liew also cited assistance beyond tax changes. Two RM100 SARA MADANI payments are planned, one before Hari Raya Aidilfitri and another ahead of the country's 70th National Day celebrations. They are expected to reach up to 13 million Malaysians, including middle-income households. Saravanan said the payments are for Malaysians aged 18 and above who are not STR recipients.
STR and Sara allocations rise to RM16 billion next year from RM15 billion this year. Eligible STR recipients can receive Sara assistance of up to RM150 monthly, or up to RM1,800 a year. Electricity subsidy protection covers monthly consumption up to 800 kilowatt-hours, reaching up to 90 per cent of domestic users.
BUDI MADANI provides a basic allowance of up to 300 litres a month, usable for subsidised RON95 petrol or diesel. Eligible private diesel jeep and pickup owners can receive another 100 litres monthly. Based on fuel prices from Oct 15 to 21, using the full RON95 allocation was estimated to provide RM789 in monthly subsidy value. Eligible recipients using 400 litres of diesel were estimated to receive RM1,228.
Jualan Rahmah MADANI and Jualan Agro MADANI receive RM750 million for 35,000 targeted programmes. Back-to-school assistance rises from RM150 to RM200 per pupil, regardless of income group, for an estimated 5.3 million students.
My50 continues for 300,000 Prasarana bus and rail users in the Klang Valley. MyKomuter50 is expected to serve 40,000 KTM Komuter users, with average savings of up to RM160 a month. First-time homebuyers receive a full stamp-duty exemption on loan agreements and transfer instruments for homes up to RM500,000. Above that amount and up to RM750,000, the exemption covers the first RM500,000 in full and half of the remaining amount.
Top earners and businesses face separate tax changes
For small and medium-sized businesses, the proposed rates fall to 14 per cent on the first RM150,000 of chargeable income and 16 per cent on income from RM150,000 to RM600,000. The government estimates about 300,000 businesses could benefit, with savings of up to RM6,000.
New Global Services Hubs would receive a five per cent rate on income from qualifying activities from Jan 1, 2027. The incentive would extend to treasury and fund activities, with withholding-tax relief on interest and stamp-duty exemptions for intercompany loan agreements, including under the Johor-Singapore Special Economic Zone package.
Income-tax exemptions for equity crowdfunding and angel investors continue through Dec 31, 2030. Green incentives also extend to the end of 2030, including investment tax allowances of up to 100 per cent for green projects and electric-vehicle charging stations. Companies buying green technology assets for their own use would also qualify for allowances of up to 100 per cent.
The budget raises the minimum wage from RM1,700 to RM2,000 from June 2027. A temporary exemption applies to MSMEs with annual turnover below RM50 million. Minimum starting salaries for semi-skilled workers and university graduates are set at RM2,500. Soh said businesses also need simplicity and certainty as they face e-Invoicing, expanded sales and service tax requirements and increasingly digital tax administration.
Liew says the government is studying the income groups it tracks
In Parliament on Monday, Oct 19, Liew said the government had data on middle-income households while the Economy Ministry was studying the T15 income classification. He was responding to Datuk Haji Adnan Abu Hassan of BN-Kuala Pilah, who asked about aid for households no longer eligible for targeted assistance but still facing rising costs.
“The real problem in our country is that the middle class is smaller than the poorer group,” Liew said. “What the government wants is for us, one day, to have a middle class that is bigger than the B40.”
The Finance Ministry projects the fiscal deficit at 3.3% of GDP next year, moving toward a 3% target by 2028. Its 2027 Fiscal Outlook puts the deficit at RM77.5 billion, down from RM78.5 billion this year, and projects debt-to-GDP at 63.7%, compared with 65.2% in 2025. The outlook forecasts an absolute deficit reduction of RM992 million, or 1.3%, next year.
