Introduction to Income Taxes

What is income tax?

Income tax is a compulsory payment to the Inland Revenue Board of Malaysia (Lembaga Hasil Dalam Negeri Malaysia – LHDN) on the chargeable income you make for the year.

 

When do you file your taxes?

Usually, you file taxes by 30 April every year. Taxes are filed for income you made in the previous year. This is called the assessment year.

 

Who needs to file taxes?

Anyone who makes a net income (after EPF deductions) of RM34,000 and above for the year needs to register a tax file and submit tax returns annually.

 

Tax terms you need to know:

Term Meaning
Chargeable income Your total income from all sources minus your tax reliefs.
Tax relief Expenses that you can deduct from your total income to help reduce the amount of tax payable.
Tax rate The percentage that is used to calculate how much tax you need to pay (tax payable).
Tax rebate Deductions that can be made against your tax payable.
Monthly Tax Deduction (MTD/PCB – Potongan Cukai Bulanan) A monthly deduction that your employer takes out of your salary to pay your taxes.
Tax refund This is a refund that you get from LHDN if you have overpaid your taxes.

 

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