Update on Specification for Monthly tax deduction (MTD) calculation
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The Inland Revenue Board of Malaysia (IRBM) has introduced important updates to the Monthly Tax Deduction (MTD) system for 2025, aimed at providing greater tax relief and simplifying employer compliance.
Expanded Reliefs for Medical and Lifestyle Expenses
- Medical Reliefs for Parents and Grandparents: The scope now includes expenses for grandparents, alongside parents, under the RM8,000 limit. Vaccination expenses are also eligible under the sub-category for full medical examinations.
- Medical Expenses for Self, Partner, and Child: Expanded to cover diagnostic screening, self-examination equipment, and other diagnostic tools. The cap for early intervention or rehabilitation treatments for disabilities has increased from RM4,000 to RM6,000, maintaining the overall RM10,000 limit.
- Lifestyle Relief: Sports-related expenses, such as equipment or membership fees, can now be claimed for parents, capped at RM1,000.
Extended Reliefs
- SSPN Net Deposits: Relief extended to 2027.
- Private Retirement Schemes and Deferred Annuities: Extended to 2030.
- Childcare Fees: Relief of up to RM3,000 extended until 2027.
- Education and Medical Insurance: Increased from RM3,000 to RM4,000.
Increased Reliefs for Persons with Disabilities (OKU)
- Relief for self-disability increased from RM6,000 to RM7,000.
- Relief for disabled spouses increased from RM5,000 to RM6,000.
- Dependent Disabled Children Under 18: Previously, one disabled child was considered equivalent to 3 children for relief purposes. This has now been increased to 4 children, effectively raising the relief amount to RM8,000 per disabled child.
- Dependent Disabled Children Above 18 in Higher Education: If the child is receiving full-time education (diploma level onwards in Malaysia or degree level overseas), the equivalence has increased from Seven children to eight children, significantly boosting the relief to RM16,000 per child.
New Additions
- Electric Vehicle (EV) and Sustainability Relief: Expanded to include the purchase of food waste composting machines for household use, with a RM2,500 limit.
- Interest on First-Home Loans: Reintroduced, offering relief up to RM7,000 for homes valued up to RM500,000 and RM5,000 for homes valued between RM500,001 and RM750,000. Applicable for properties purchased between 2025 and 2027, with relief valid for three consecutive years.
Updated Forms and Guidelines
Revisions have been made to Forms TP1 and TP3 to accommodate these changes. Employers are expected to ensure compliance with the updated specifications without requiring re-verification if they already comply with previous guidelines (2012–2024).
Please contact your Mercans’ services delivery team for any additional information regarding the implications of the above change.
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Malaysia – Update on Specification for Monthly tax deduction (MTD) calculation
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