Malaysia will increase individual income tax relief from RM9,000 to RM12,000 under Budget 2027, marking the first increase to the relief since 2010. Prime Minister Datuk Seri Anwar Ibrahim announced the change while tabling the national budget in the Dewan Rakyat, saying the measures are intended to ease financial pressure on middle-income households. Budget 2027 will also lower tax rates for selected income brackets and expand reliefs to cover a wider range of everyday expenses.
The changes are particularly aimed at easing the cost-of-living burden faced by the M40 group. In addition to the higher basic individual relief, taxpayers will be able to claim deductions for several newly recognised expenses, including AI subscriptions, pet-related costs and broader family care.
Individual Tax Relief Rises From RM9,000 To RM12,000
The most significant change is the increase in individual tax relief from RM9,000 to RM12,000. The additional RM3,000 relief reduces the amount of income that is subject to personal income tax, potentially lowering the tax payable by eligible individuals. This is the first adjustment to the individual relief amount since 2010.
For taxpayers who qualify, the higher relief should provide some additional breathing room as everyday expenses continue to rise. The actual amount saved will depend on the taxpayer's income and applicable tax bracket, but the change effectively allows a larger portion of annual income to remain tax-free.
Selected Income Tax Rates Will Also Be Reduced
Budget 2027 will also introduce lower income tax rates for selected taxable income brackets. Individuals with taxable income between RM70,000 and RM100,000 will see their tax rate reduced to 18%. Those with taxable income between RM100,000 and RM150,000 will benefit from a reduced rate of 24%.
The changes are intended to provide additional relief to middle-income earners, particularly those who may not qualify for the same level of direct financial assistance available to lower-income groups. Combined with the higher individual tax relief, the revised rates could reduce the overall tax burden for a significant number of working Malaysians.
Higher Earners To Face A 30% Tax Rate
At the other end of the income spectrum, the government is taking what it describes as a more progressive approach to taxation. Individuals earning more than RM1 million will be subject to an income tax rate of 30%.
The adjustment reflects the government's intention to provide greater relief to middle-income taxpayers while requiring those with significantly higher earnings to contribute at a higher rate. Anwar said the government recognises that M40 households continue to face pressure as living costs increase even when their incomes are above the thresholds for many assistance programmes.
AI Subscriptions To Qualify For Tax Relief
One of the more unusual additions under Budget 2027 is tax relief for subscriptions to artificial intelligence services. The government has not yet announced the specific relief limit that will apply to AI subscriptions, but their inclusion reflects Malaysia's growing focus on encouraging AI adoption.
The measure could make paid AI tools more accessible to professionals, students and other users who rely on them for productivity, learning or creative work. It also fits with the government's broader ambition to strengthen Malaysia's AI ecosystem and position the country as a regional AI hub. However, taxpayers will need to wait for further details on which services qualify and how much can be claimed.
Pet Vaccinations And Adoption Costs Included
Budget 2027 will also expand tax reliefs to cover pet vaccinations and the adoption of pets from registered centres. This is another new category of personal expenses being recognised under the tax system. The government has not yet disclosed the maximum claimable amount for these expenses.
The inclusion could help offset some of the initial and ongoing costs associated with responsible pet ownership. Limiting adoption-related relief to registered centres also suggests that the measure is intended to support more regulated and responsible adoption practices.
Medical Relief Expanded To Postnatal Care
Medical tax relief will be broadened to include postnatal care services. This means eligible expenses incurred after childbirth will be recognised alongside existing medical-related deductions. The change could provide additional support to families during the early period after a child is born.
Postnatal care can involve a range of services and expenses depending on individual needs. Expanding relief into this area recognises that healthcare costs do not necessarily end immediately after delivery. More detailed guidance will be needed to clarify exactly which postnatal services qualify.
Parents And Grandparents Care Relief Becomes Broader
Tax relief for caring for parents and grandparents will also be expanded. Previously, the relief was more closely focused on healthcare-related expenses, but Budget 2027 will broaden it to include all care-related costs.
This could make the deduction more relevant to families supporting elderly relatives with everyday care needs rather than only medical treatment. As Malaysia's population ages, family caregiving is becoming an increasingly important household expense. Broadening the relief gives taxpayers more flexibility in recognising those costs.
Sports And Education Reliefs Also Expanded
Sports equipment relief will be widened to include sports shoes. This makes the deduction more practical for people participating in activities where footwear represents one of the main costs. The change expands the category beyond more traditional sports equipment.
Education and skills training relief will also be broadened to cover all fields of study rather than selected areas. Children's tuition fees will also become eligible under the expanded framework. Together, these changes make the education-related relief more flexible for families and individuals investing in learning and skills development.
A Broader Shift Towards Everyday Expenses
The pattern across Budget 2027 is clear: tax reliefs are being expanded beyond traditional categories to cover a wider range of modern household expenses. AI subscriptions, pet care, postnatal services, elderly care, sports shoes and tuition fees all reflect areas where families may now spend more than they did when older tax rules were designed.
The challenge will be keeping the system simple enough for taxpayers to understand. As more categories are added, clear guidance on eligibility, documentation and claim limits will become increasingly important. The effectiveness of the measures will also depend on the final relief caps announced for each new category.
Final Thoughts
Budget 2027's increase in individual income tax relief from RM9,000 to RM12,000 is one of the most notable personal tax changes announced this year, particularly as it is the first increase since 2010. Combined with lower tax rates for selected middle-income brackets, the move is intended to ease some of the financial pressure facing Malaysians dealing with higher living costs.
The expansion of tax reliefs into AI subscriptions, pet expenses, postnatal care, family caregiving, sports and education also reflects a broader update to how the government defines household spending priorities. The full impact will depend on the final claim limits and implementation details, but the changes could make the personal tax system more relevant to the expenses Malaysians actually face today.
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