Malaysia Income Tax 2025: Key Changes, Deadlines and Top Tips

    March 28, 2025 • 2 months ago
    Malaysia Income Tax 2025: Key Changes, Deadlines and Top Tips

    As Malaysia's 2025 income tax season approaches, taxpayers must familiarize themselves with the latest regulations, deadlines, and available reliefs to ensure accurate and timely submissions. This guide provides detailed insights into the 2025 tax season, offering actionable steps to navigate the process effectively.

    Items of interest:

    • Key Deadlines
    • Notable Tax Changes
    • Expert Insights and What’s Next for the Taxpayer

    Key Deadlines for the 2025 Tax Season

    The Inland Revenue Board of Malaysia (LHDN) has outlined specific deadlines for the submission of income tax returns for the Year of Assessment (YA) 2024:

    • Form BE (for individuals without business income): The due date for submission is 30 April 2025. A grace period is provided until 15 May 2025 for e-Filing submissions.
    • Form B (for individuals with business income): The due date for submission is 30 June 2025, with a grace period until 15 July 2025 for e-Filing submissions.

    It's crucial to adhere to these deadlines to avoid penalties. For instance, submitting Form BE after 15 May 2025 may result in penalties under subsection 112(3) of the Income Tax Act 1967.

    Notable Tax Changes Effective YA 2025

    Several significant tax changes have been introduced for YA 2025:

    1. Dividend Income Tax: A 2% tax will be imposed on annual chargeable local dividend income exceeding RM100,000 received by individual shareholders, including residents, non-residents, and individuals holding shares through nominees. This measure aims to create a more progressive tax structure and expand the tax base.
    2. Enhanced Tax Reliefs:
      • Disabled Individual Taxpayer Relief: Increased from RM6,000 to RM7,000.
      • Disabled Spouse Relief: Increased from RM5,000 to RM6,000.
      • Unmarried Disabled Children Relief: Increased from RM6,000 to RM8,000.
      • Education and Medical Insurance Premiums: Relief amount increased from RM3,000 to RM4,000.
      • Sports Activities, Health, and Elderly Care: Specific reliefs have been expanded to promote well-being and active lifestyles.
    3. Mandatory e-Filing Implementation: Starting from 2025, e-Filing has become mandatory for all taxpayers. The LHDN emphasizes the e-Filing system's importance for efficient and accurate tax return submissions. Taxpayers are encouraged to refer to the Tax Return Form (BN) filing programme for guidance, accessible through the LHDN's official portal.
    4. Interest Relief for First Residential Home Loan: To encourage home ownership and increase disposable income, individual income tax relief is granted on interest payments for the first residential home loan, applicable for sales and purchase agreements executed between 1 January 2025 and 31 December 2027. The relief amounts are:

    Up to RM500,000 house price: RM7,000 per year.

    Above RM500,000 up to RM750,000 house price: RM5,000 per year.

    This relief is applicable for three consecutive years of assessment, starting from the first year the housing loan interest is paid.

    Actionable Steps for Taxpayers

    To navigate the 2025 tax season effectively, consider the following steps:

    1. Organize Financial Records: Gather all necessary documents, including income statements, receipts for deductible expenses, and records of any tax reliefs or rebates you intend to claim.
    2. Utilize the e-Filing System: Familiarize yourself with the LHDN's e-Filing platform. Ensure you have an active account and understand the submission process to avoid last-minute complications.
    3. Stay Informed on Tax Changes: Keep abreast of the latest tax regulations and reliefs applicable for YA 2025. This knowledge can significantly impact your tax planning and potential refunds.
    4. Consult Tax Professionals: If uncertain about any aspect of your tax obligations, seek advice from certified tax consultants to ensure compliance and optimize your tax position.
    5. Meet Submission Deadlines: Adhere strictly to the submission deadlines to avoid penalties. Mark these dates on your calendar and set reminders as necessary.

    Expert Insights

    Tax experts emphasize the importance of proactive tax planning, especially with the introduction of new tax measures in 2025. According to Deloitte's GES Tax Alert, the implementation of the 2% tax on dividend income exceeding RM100,000 reflects the government's effort to enhance tax equity among taxpayers.

    Conclusion

    The 2025 income tax season in Malaysia introduces several changes aimed at creating a more equitable tax system and encouraging positive financial behaviors among citizens. By staying informed and proactive, taxpayers can navigate these changes effectively, ensuring compliance and optimizing their tax outcomes.