Malaysia Budget 2026 Tax Reliefs: Key Payroll Benefits

On October 10, 2025, Malaysia’s Finance Minister unveiled the Fourth MADANI Budget, aptly titled “The Rakyat’s Budget.” This budget continues the government’s commitment to fiscal discipline, economic transformation, and social protection, with a strong emphasis on supporting families, promoting sustainable lifestyles, and enhancing healthcare access.

Effective from January 1, 2026, several direct tax proposals under Budget 2026 are set to impact payroll and individual income tax reliefs. These measures aim to ease financial burdens for Malaysian taxpayers while encouraging responsible spending and inclusive protection. Below is a summary of the key proposals:

1. Expanded Life Insurance and Takaful Relief

To promote broader participation in life insurance and takaful schemes, the existing individual income tax relief of up to RM3,000 - currently applicable for premiums paid for self and spouse- is proposed to be extended to include children of the taxpayer. This change recognizes the importance of securing the financial future of the entire family unit.

2. Expanded Education and Medical Insurance Relief

The current relief of up to RM4,000 for education and medical insurance premiums paid for self and spouse will now cover children as well. This extension supports families in safeguarding their children’s health and education, aligning with the government’s long-term vision for human capital development.

3. Broader Relief for Childcare and Daycare Services

Previously limited to nursery or kindergarten fees for children aged up to 6 years, the RM3,000 tax relief is proposed to be expanded to include fees paid to registered daycare and after-school transit centres for children up to 12 years of age. This move acknowledges the evolving childcare needs of working parents and promotes access to safe, regulated care facilities.

4. Sustainable Lifestyle Tax Relief Expansion

The existing RM2,500 tax relief for lifestyle purchases - such as personal computers and smartphones—is proposed to be extended to include:

• Food waste disposers
• Closed-circuit television (CCTV) systems for home use

This relief will be available for the years of assessment (YA) 2026 and YA 2027, and can be claimed only once within this two-year period. The inclusion of these items reflects the government’s push toward sustainability and home security.

5. Enhanced Relief for Disabled Children (Autism and Related Conditions)

In a significant move to support families with special needs children, the tax relief for expenses related to assessment, diagnosis, early intervention, and continuous treatment for children with autism (aged 18 and below) is proposed to be increased from RM6,000 to RM10,000. This enhancement demonstrates the government’s commitment to inclusive healthcare and education.

6. Expanded Vaccination Relief

To encourage preventive healthcare, the RM1,000 tax relief for vaccination expenses will now cover all types of vaccines registered and approved by the National Pharmaceutical Regulatory Agency (NPRA), Ministry of Health. This expansion supports public health efforts and ensures broader access to immunization.

7. Tax Relief for Domestic Tourism

To stimulate local tourism and cultural engagement, a new tax relief of up to RM1,000 is proposed for entrance fees paid to domestic tourist attractions and cultural programs during YA 2026. This initiative not only supports the tourism sector but also encourages Malaysians to explore and appreciate their cultural heritage.

8. Tax Deduction for Donations to Anti-Corruption Programmes

In a bid to strengthen governance and transparency, donations made to anti-corruption programmes recognized by the Malaysian Anti-Corruption Commission (MACC) will be eligible for income tax deductions. This measure incentivizes public support for integrity-building initiatives.

Conclusion

Malaysia’s Budget 2026 introduces a range of thoughtful and inclusive tax reliefs aimed at supporting families, promoting sustainable living, and enhancing healthcare and education access. These proposals reflect the government’s commitment to building a resilient and equitable society under the MADANI framework.

As these changes take effect from January 1, 2026, individual taxpayers and employers should begin reviewing their payroll systems and financial planning strategies to ensure compliance and maximize available benefits.