Employment income: what is taxable?

What is employment income?

In Malaysian income tax, employment income is a class of income taxed under section 13 of the Income Tax Act 1967 (ITA 1967).

According to the official HASiL page, employment income under section 13 covers several paragraphs — in brief, income from employment (including cash receipts, benefits-in-kind, living accommodation benefits, repayments from unapproved funds, and compensation) may be taxed.

Source: HASiL — Introduction to Individual Income Tax; HASiL — How to File; Income Tax Act 1967 (see Official sources section).

What items are included?

According to HASiL's official list, the following items are included in employment income:

• Salary;
• Wages;
• Tips;
• Allowances;
• Commission;
• Overtime;
• Bonus / incentives;
• Perquisites;
• Employee share option schemes;
• Tax borne by the employer;
• Director fees;
• Gratuity, including deferred payments upon termination of employment (that do not qualify for exemption under any provision of the act);
• Accrued leave pay received in advance in the case of termination;
• Other remuneration connected with employment.

Source: HASiL — How to File (official list of 14 items under subsection 13(1)(a)).

When is it taxed?

Employment income is taxed in the year it is received (subsection 25(1) ITA 1967). This means salary, bonus and allowances you receive in a year are usually reported in that year.

There is a special exception for employees who cease employment and leave Malaysia and become non-residents the following year: employment income of the following year is taxed in the year of departure (subsection 25(6) ITA 1967).

Source: HASiL — How to File (application of subsections 25(1) and 25(6)).

The RM37,333 threshold — what does it mean?

HASiL states that individuals receiving annual employment income exceeding RM37,333 and those who have Monthly Tax Deduction (PCB) are liable to be taxed.

Important: this threshold is an indicator of liability to be taxed, not a filing exemption. It does not mean "small salary, no need to file". In some circumstances, individuals still need to register or report even if income is below this threshold — verify your situation with HASiL.

Source: HASiL — Introduction to Individual Income Tax.

Benefits-in-kind (MBB) and value of living accommodation (NTK)

Part of employment income is benefits-in-kind (MBB) and value of living accommodation (NTK) — the value of benefits received by an employee from the employer.

Source: HASiL — Prosedur Pengisian Penyata EA & Borang E (official material; YA 2024, principles remain).

Final Tax — an option, not an obligation

Taxpayers with employment income and PCB may choose to not submit the Income Tax Return Form (BNCP) — this is known as Final Tax (Cukai Muktamad).

The conditions for this option are:

1. Having only one employer;
2. No joint assessment choice under section 45 ITA;
3. PCB is deducted according to the 1994 Tax Deduction Schedule (KKCP) or at a zero rate;
4. Serving less than 12 months with the same employer;
5. New employees serving less than 12 months in the year of assessment.

Source: HASiL — Introduction to Individual Income Tax; HASiL — How to File.

Resident vs non-resident

Non-resident individuals are taxed at a flat rate of 30% and are not entitled to any deductions (including personal reliefs).

Resident individuals are taxed at progressive rates and are entitled to claim allowable reliefs.

Source: HASiL — Introduction to Individual Income Tax.

Forms used

Form	For whom
BE	Resident — employment + other income, without business
B	Resident — with business
M	Non-resident
EA	Annual remuneration statement prepared by the employer

Source: HASiL — Introduction to Individual Income Tax.

Simple example

Siti works as an engineer and receives a monthly salary of RM6,000. In 2026, she received salary, an annual bonus and travelling allowance. All these items are employment income under section 13 and must be reported in Form BE (Siti is a resident with no business).

Aiman works with two employers in the same year. He is not eligible to choose Final Tax because the "only one employer" condition is not met — he must submit the BNCP.

Liyana ceased employment and moved abroad, becoming a non-resident. Under subsection 25(6), employment income that would have been received the following year is taxed in the year of her departure.

(Illustrative examples to show concepts — not specific tax advice.)

Frequently Asked Questions (FAQ)

Q. Are allowances and bonuses taxable? A. Yes — allowances, commission, overtime, bonus/incentives and perquisites are included in HASiL's official list of employment income. Verify your specific allowance types (some allowances may be exempt under specific provisions — check with HASiL).

Q. I received goods from my employer — is it taxable? A. Benefits-in-kind (MBB) and value of living accommodation (NTK) are part of employment income. The valuation formula is not yet confirmed in this draft — this item still awaits official confirmation from HASiL — check again with HASiL before deciding. before publication.

Q. My salary is below RM37,333 — do I need to file? A. The RM37,333 threshold is an indicator of liability to be taxed, not a filing exemption. If you have PCB or other circumstances requiring filing, you still need to report. Verify your situation with HASiL.

Q. I am a non-resident — what is my tax rate? A. Non-resident individuals are taxed at a flat rate of 30% and are not entitled to any deductions.

Q. I have one employer and PCB is deducted — do I need to file? A. You may be eligible to choose Final Tax (not submitting the BNCP) if all conditions are met — including only one employer and no joint assessment choice. This is an option, not an obligation.

Glossary

• ITA 1967 — Income Tax Act 1967 (Act 53).
• Employment income — income from employment under section 13 ITA 1967.
• MBB — benefits-in-kind.
• NTK — value of living accommodation.
• PCB — Monthly Tax Deduction.
• BNCP — Income Tax Return Form.
• Cukai Muktamad (Final Tax) — the option not to submit the BNCP under certain conditions.
• KKCP — Tax Deduction Schedule.