Taxes can take a big chunk out of your income, but did you know there are legal ways to reduce the amount you pay? Many Malaysians overpay on their taxes simply because they don’t take advantage of the available tax reliefs, rebates, and incentives.
This guide will show you exactly how to legally pay less tax in Malaysia by maximizing deductions, utilizing government incentives, and making smart financial moves that keep more money in your pocket.
1. Maximize Personal Tax Reliefs
Malaysia offers various tax reliefs that allow you to deduct certain expenses from your taxable income. These reliefs can significantly reduce your overall tax bill.
Personal Tax Relief Categories for YA 2025
| Category | Maximum Relief (RM) |
|---|---|
| Self and dependent | 9,000 |
| Medical expenses for parents | 8,000 |
| EPF & life insurance | 7,000 |
| Education fees (self) | 7,000 |
| Medical expenses (self, spouse, children) | 10,000 |
| Lifestyle (books, internet, sports equipment) | 2,500 |
| Childcare fees | 3,000 |
| Private retirement scheme (PRS) | 3,000 |
| Purchase of electric vehicle (EV) charging facility | 2,500 |
| Medical & education insurance premiums | 4,000 |
To fully maximize your savings, ensure you keep receipts and claim every eligible tax relief.
2. Contribute to EPF and PRS for Extra Tax Savings
Employee Provident Fund (EPF) Contributions
If you’re employed, your mandatory EPF contributions are tax-deductible up to RM4,000.
Smart Tip: If you’re self-employed or a freelancer, consider contributing voluntarily to EPF to enjoy tax deductions while saving for retirement.
Private Retirement Scheme (PRS)
PRS is an additional voluntary retirement savings scheme, and contributions qualify for tax relief up to RM3,000 per year. If you haven’t signed up for PRS, this is an easy way to reduce your taxable income while securing your financial future.
3. Claim Tax Rebates (Direct Reductions from Tax Payable)
Tax rebates directly reduce the tax amount you have to pay, unlike reliefs that reduce your taxable income.
| Rebate | Amount (RM) | Eligibility |
| Zakat (Islamic charitable donation) | Up to 100% of tax payable | Muslims only |
| Individual earning below RM35,000 | 400 | Automatically applied |
Even if you don’t have many reliefs to claim, these rebates can significantly lower your tax bill.
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4. Invest in Tax-Deductible Schemes
Some investments provide tax deductions and exemptions, making them powerful tools to reduce your tax burden.
Tax-Advantaged Investments:
- Amanah Saham Bumiputera (ASB) Loans – Dividends from ASB are tax-exempt.
- Tabung Haji – Savings here are fully tax-free.
- Government-Backed Bonds – Some Sukuk and Malaysian government securities offer tax-exempt returns.
- Real Estate Investment Trusts (REITs) – Certain REITs offer tax-exempt dividends for investors.
5. Use Your Company Benefits for Tax-Free Perks
Some employee benefits are not taxable, so maximizing these perks can reduce your taxable salary.
Tax-Free Employee Benefits:
- Petrol & travel allowances (up to RM6,000)
- Childcare subsidies (up to RM2,400 per year)
- Mobile phone and laptop provided by employer
- Work-related insurance (medical, accident, life)
- Educational assistance
Instead of requesting a higher salary (which increases your tax), negotiate for higher allowances or company-paid benefits that are tax-free.
6. Buy Tax-Deductible Life Insurance & Medical Policies
Having insurance not only provides financial protection but also reduces your taxable income. The government allows tax relief for life insurance and medical insurance premiums.
| Insurance Type | Tax Relief (RM) |
| Life Insurance | 3,000 (combined with EPF) |
| Medical & Education Insurance | 4,000 |
This is an increase from RM3,000 in previous years, providing an even better incentive for Malaysians to secure insurance coverage.
7. Start a Side Business (And Deduct Business Expenses)
If you have a side business, such as freelancing, online selling, or consulting, you can legally deduct business expenses from your taxable income.
Tax-Deductible Business Expenses:
- Office supplies & equipment
- Marketing & advertising costs
- Internet & phone bills
- Travel expenses related to business
- Software subscriptions (e.g., Canva, Microsoft 365)
By turning a hobby into a registered side business, you can legally reduce your tax burden while earning extra income.
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Final Thoughts: Keep More of Your Hard-Earned Money
The key to paying less tax legally in Malaysia is simple: know the tax system, claim every relief, and use tax-friendly financial strategies. By maximizing deductions, leveraging rebates, and structuring your income wisely, you can save thousands of ringgit every year.
Quick Recap:
✓ Claim maximum tax reliefs (EPF, PRS, medical, lifestyle)
✓ Utilize tax-free employee benefits
✓ Invest in tax-advantaged schemes (ASB, REITs, Tabung Haji)
✓ Start a side business and deduct expenses
✓ Get insurance & PRS contributions for extra savings
By applying these tax-saving strategies, you’ll be able to reduce your tax burden and grow your wealth faster.
Want to learn how to optimize your finances further? Check out our guide: How to Save RM10,000 in a Year in Malaysia – Simple Budgeting Plan (2024)
Disclaimer: This article is for informational purposes only and does not constitute professional tax advice. Please consult a licensed tax consultant or accountant for personalized tax planning.
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