Donations & Charitable Bodies: Tax Deductions and Exemptions

Three separate matters

This article distinguishes three matters that are often confused:

1. Donor deduction — the tax deduction claimed by those who donate.
2. IOT income exemption — the tax exemption on the income of approved institutions/organisations/funds (IOT).
3. IOT RPGT exemption — the exemption from Real Property Gains Tax on assets disposed of by an approved IOT.

Important: "charitable exemption" does not mean all welfare bodies are automatically exempt — KPHDN approval is required.

Donation deduction for donors

Type of recipient	Deduction treatment	Evidence
Federal Government, State Government and Local Government	Deduction equal to the donation amount, no limit	Receipt Kewangan 38 (Kew-38)
IOT approved by KPHDN under subsection 44(6)	Deduction limited to 10% of aggregate income (individuals and companies)	KPHDN approval receipt

(Source: HASiL — General Explanation of the KPHDN Approval Concession — R1; HASiL — Donation/Contribution Receipt — R3.)

In-kind donations are not eligible: only cash donations supported by an official receipt qualify for a deduction. In-kind donations (food, clothing, computers and so on) do not qualify. (Source: R3.)

Example of the 10% cap: aggregate income of RM100,000 → deduction for donations to an approved IOT is limited to RM10,000 in that year of assessment (illustration based on R3 principles; your chargeable figures may differ).

Approved IOT exemptions

KPHDN approval under subsection 44(6) is an incentive that is application-based, not automatic. The activity criteria are stated in section 44(7) ACP; the IOT is not established mainly to make a profit; the procedural guidelines were issued 20 January 2020. (Source: R1, R2.)

After approval, all income received, including donations and cash contributions from donors/contributors is exempt — power: paragraph 13(1)(a) of Schedule 6 of the Income Tax Act 1967 (ACP). (Source: R1, R2, R5.)

RPGT: assets disposed of by an approved IOT are not subject to Real Property Gains Tax — paragraph 3(e) of Schedule 2 of the Real Property Gains Tax Act 1975 (ACKHT 1975) (the acquisition price is deemed equal to the disposal price). Filing CKHT 1A is still required. (Source: R1.)

Unapproved IOT

Donations/contributions received by an IOT that is not approved may be business income (section 4(a) ACP) if they are trading in character (recurring, flowing from a source, ordinary course of business). Expenses specific to charitable/welfare objectives are allowed under section 33(1) ACP; unutilised surplus may be taxed. (Source: HASiL — Practice Note No.1/2025 — R5.)

KPHDN approval process & e-Derma

• The s.44(6) approval application process is not automatic; approval is given via an approval letter (period, conditions, receipt format). (Source: R2.)
• e-Derma: from 15 June 2026, new applications for s.44(6) approval by institutions/organisations must be made through the e-Derma system at MyTax. Applications by funds or IOTs that appoint a tax agent remain manual for now. The system also facilitates applications for extending the approval period, submission of documents (Audited Financial Statements, Self-Review Form) and amendments to information. (Source: R6.)
• e-Derma is an administrative process (since 15 June 2026), not a change of rates or deductions.

Related questions

Are foreign donations eligible? Foreign contributions are exempt for the IOT; for contributors, the deduction is subject to Malaysian tax. (Source: R4.) this item still awaits official confirmation from HASiL — check again with HASiL before deciding.: full details of the scope of foreign contributions need to be verified from the act text before publication.

Are course fees received by an IOT exempt? Course fees are IOT income and are not exempt; related references include section 44(11D) ACP and P.U.(A) 139/2020. (Source: R4.)

What is the full list of s.44(7) activity categories? this item still awaits official confirmation from HASiL — check again with HASiL before deciding.: the full list of s.44(7) activity categories (institutions, organisations, funds) has not been confirmed at this review — check the act text/guidelines before listing them.

What are the detailed conditions of the approval guidelines (20 Jan 2020)? this item still awaits official confirmation from HASiL — check again with HASiL before deciding.: the detailed conditions of the approval guidelines (supporting documents, approval period, post-approval obligations — reports, self-review) have not been fully assessed at this review.

What is the accepted KPHDN receipt format? this item still awaits official confirmation from HASiL — check again with HASiL before deciding.: the KPHDN receipt format (mandatory details) has not been fully extracted at this review — refer to the HASiL receipt page.

What about zakat/wakaf/endowment? this item still awaits official confirmation from HASiL — check again with HASiL before deciding.: the treatment of zakat/wakaf/endowment (section 44(11A)/44(11D) ACP, P.U.(A) 139/2020) is a separate topic — do not mix them in without a source.

What is the direct HASiL media statement URL for e-Derma? this item still awaits official confirmation from HASiL — check again with HASiL before deciding.: the direct HASiL media statement URL (media details) — quoted via Bernama/CTIM at this review; verify the official HASiL link before publishing.