Budget 2026 was announced on 10 October 2025, when Prime Minister and Finance Minister Dato’ Seri Anwar Ibrahim tabled Malaysia’s most ambitious federal budget to date. Notably, the government proposed a RM470 billion envelope (including investments by state-linked entities) with the “baseline” operating and development allocation set at RM419.2 billion, marking a step up from previous years.
Notable announcements include:
- introduction of a carbon tax initially targeting iron, steel, and energy sectors.
- sharper excise duties on alcohol and tobacco coming into force from November 1, 2025.
- accelerated rollout of e-invoicing and digital tax compliance tools, plus self-assessment for stamp duty to curb leakages.
- enhanced allocations and incentives for strategic growth sectors — especially semiconductors, AI, energy transition and digital industries.
- expanded social protection and targeted reliefs: e.g. broader childcare reliefs, extended benefits for special-needs families, and reliefs for life insurance/takaful premiums.
- a fiscal roadmap aimed at narrowing the budget deficit to 3.5% of GDP by 2026, with medium-term goals of achieving a sub-3% deficit.
With these measures, the government signals a shift from recovery to transformation — balancing continued fiscal discipline with strategic investments and social inclusion.
New and Expanded Tax Reliefs for Individuals (Budget 2026)
These changes generally allow you to claim more tax relief for expenses related to health, family, and home safety. Most are effective from the Year of Assessment (YA) 2026.
| What is the Change? | In Simple Terms | |
| Vaccination Expenses | The types of eligible vaccines for the relief (up to RM1,000) are expanded. | You can now claim tax relief for all vaccines approved by the Ministry of Health, not just a specific list. |
| Childcare/Kindergarten | The total tax relief is permanently increased and the scope of eligible centers is expanded. | The relief for childcare/kindergarten fees is now a permanent maximum of RM3,000 (up from RM2,000). It is also extended to fees for daily care centers and after-school transit centers for children up to 12 years old. |
| Children with Learning Disabilities | The specific relief limit for early intervention and rehabilitation expenses is increased. | The amount you can claim for therapy, assessment, and diagnosis for children with learning disabilities (like autism or ADHD) is increased from RM6,000 to RM10,000. |
| Life Insurance | The scope of the life insurance relief (up to RM3,000) is expanded. | You can now claim tax relief for life insurance premiums paid for your children as well as for yourself and your spouse. |
| Home Safety & Sustainability | The list of eligible items for the environmental/safety relief (up to RM2,500) is expanded. | You can now claim this relief for buying a household food waste grinder and a home CCTV system. |
| Domestic Tourism | A new tax relief is introduced for tourism expenses. | You can claim up to RM1,000 for entrance fees to local tourist attractions (like theme parks, zoos, and museums) and for cultural and art programs. |
Here’s a refresher on Budget 2025 personal tax reliefs: What’s New for Your Income Tax Relief in YA 2025?
Business and Partnership Taxes Incentives (Budget 2026)
These measures focus on foreign investments, corporate listings, and encouraging donations to public causes.
| What is the Change? | In Simple Terms | |
| LLP Profit Distributions | Profits distributed to individual partners in a Limited Liability Partnership (LLP) will now be taxed. | If you are an individual partner in an LLP, the portion of your profit distribution that exceeds RM100,000 per year will be subject to a low income tax rate of 2%. (Previously, this income was tax-exempt.) |
| Foreign-Sourced Income (FSI) | The current tax exemption on FSI (dividends and capital gains) is extended for certain entities. | Resident companies, LLPs, cooperative societies, and trust bodies will get a 4-year extension (until 2030) on the tax exemption for foreign dividends and capital gains received in Malaysia. |
| Bursa Malaysia Listing | The tax deduction for listing costs (up to RM1.5 million) is extended and expanded. | The deduction is extended for 5 years (until 2030) and now includes Micro, Small and Medium Enterprises (MSMEs) in the energy and utilities sectors. |
| Public University Hospital Funds | A new tax-deductible status for donations is created. | Cash donations to the endowment funds of Public University Teaching Hospitals can now be claimed as a tax deduction (up to 10% of aggregate income). |
| Anti-Corruption Donations | Contributions to approved anti-corruption programs are eligible for tax deduction. | You can get a tax deduction for cash donations made to approved anti-corruption education programs run by Civil Society Organisations (CSOs). |
Stamp Duty Adjustments (Budget 2026)
These changes affect property ownership for non-citizens and reduce costs for first-time home buyers, employment contracts, and insurance.
| What is the Change? | In Simple Terms | |
| Non-Citizen Property | The stamp duty rate on the transfer of residential homes to non-citizens and foreign companies is increased. | The stamp duty is proposed to be doubled from 4% to 8% for residential homes bought by non-citizens (excluding permanent residents) and foreign companies. |
| First Residential Home | The current stamp duty exemption is extended. | The 100% stamp duty exemption on the transfer and loan agreement for a first home priced up to RM500,000 for Malaysians is extended for 2 years (until the end of 2027). |
| Employment Contracts | The wage threshold for the stamp duty exemption is significantly reviewed. | Employment contracts with a monthly wage of up to RM3,000 (up from RM300) are now exempt from stamp duty. This reduces the cost for businesses and employees. |
| Low-Premium Insurance | The stamp duty exemption on low-premium policies is extended. | The 100% stamp duty exemption on affordable insurance/Takaful products, including Perlindungan Tenang products, is extended for 3 years (until the end of 2028). |
A balanced strategy for health, growth, and social equity
The proposed tax measures for the Year of Assessment 2026 and beyond represent a balanced fiscal strategy aimed at enhancing public welfare, stimulating economic growth, and promoting greater social equity. The proposals indicate a clear commitment to fostering a sustainable, digitally capable, and socially conscious Malaysia.
Follow us as we continue to update on Budget 2026.
