Malaysia Tax Exempt Allowances & Benefits Guide (2026)
Malaysia Payroll Tax Guide Series
Whether you're an HR professional, payroll administrator or employee, this series explains Malaysia's payroll tax requirements from tax reliefs to Monthly Tax Deduction (PCB).
- Part 1: Malaysia Income Tax Relief Guide (2026): Complete List of Tax Reliefs & Deductions
- Part 2: Malaysia Form TP1 Guide (2026): Employee Tax Relief Declaration
- Part 3: Malaysia Form TP3 Guide (2026): Previous Employment Information
- Part 4: Malaysia PCB (MTD) Guide (2026): Monthly Tax Deduction Explained
- Part 5: Malaysia Tax Exempt Allowances, Perquisites, Gifts & Benefits Guide (2026)
- Part 6: Malaysia Benefits-in-Kind (BIK) Guide (2026)
- Part 7: Malaysia Perquisites Guide (2026)
You're currently reading: Part 5
At a Glance
| Question | Answer |
|---|---|
| What is this guide about? | Tax-exempt allowances, perquisites, gifts and benefits reportable in EA Form Part F. |
| Source | LHDN PCB (MTD) Specification 2026 |
| Who should read this? | HR, Payroll, Employers and Employees |
| Why is it important? | Helps employers classify tax-exempt benefits correctly for payroll and EA Form reporting. |
Quick Summary
This guide covers:
- Tax-exempt items recognised in the 2026 PCB Specification
- Annual exemption limits
- Conditions for each exemption
- HR reporting considerations
- Frequently asked questions
What Should Be Reported in EA Form Part F?
According to the 2026 PCB Specification, all tax-exempt allowances, perquisites, gifts and benefits should be reported in EA Form – Part F (Total Tax Exempt Allowances / Perquisites / Gifts / Benefits).
The specification lists the following tax-exempt items.
Tax-Exempt Allowances, Perquisites, Gifts & Benefits (YA2026)
| Item | YA2026 Exemption Limit | Conditions / Remarks |
|---|---|---|
| Petrol card, petrol allowance, travelling allowance or toll payment (or any combination) | RM6,000 per year | Must be for official duties. If the amount exceeds RM6,000, employees may claim further deduction for actual official-duty expenses. Supporting records must be kept for 7 years. |
| Child care allowance | RM3,000 per year | Applies to children up to 12 years old. Covers childcare allowance received by the employee or paid directly by the employer to the childcare centre. |
| Gift of fixed line telephone, mobile phone, pager or PDA | Limited to 1 unit for each category of asset | Device may be registered under the employee's or employer's name. Includes registration and installation cost. |
| Monthly subscription bills for broadband, fixed line telephone, mobile phone, pager or PDA | Limited to 1 subscription for each category | Subscription may be registered under the employee's or employer's name. Includes registration and installation cost. |
| Past achievement award, service excellence award, innovation award, productivity award and long-service award | RM2,000 per year | Long-service award applies only if the employee has served more than 10 years with the same employer. |
| Parking rate and parking allowance | Actual amount expended | Includes parking charges paid directly by the employer to the parking operator. |
| Meal allowance | No specific monetary limit stated | Regular meal allowance must be provided at the same rate to all employees. Meal allowance for overtime, outstation or overseas duties is exempt only if paid according to the employer's internal circular or written instruction. |
| Subsidised interest for housing, education or car loan | Fully exempt if the total loan does not exceed RM300,000 | If the total loan exceeds RM300,000, only part of the subsidised interest is exempt based on the formula provided in the PCB Specification. |
Important Notes for HR & Payroll
When processing payroll:
- Only treat an allowance or benefit as tax exempt if it satisfies the applicable conditions stated by LHDN.
- Apply the relevant annual exemption limits where applicable.
- Retain supporting documents and records, especially where official-duty claims are involved.
- Report qualifying tax-exempt items in EA Form Part F.
HR Checklist
Before classifying an item as tax exempt:
☑ Verify that the item appears in the applicable LHDN guidance.
☑ Check whether an annual exemption limit applies.
☑ Confirm all qualifying conditions are met.
☑ Keep supporting documents where required.
☑ Report the exempt amount correctly in EA Form Part F.
Frequently Asked Questions
1. Do all allowances qualify for tax exemption?
No. Only allowances, perquisites, gifts and benefits that satisfy the applicable LHDN conditions qualify for tax exemption.
2. Is petrol allowance always tax exempt?
No. Under the PCB Specification, the exemption applies to petrol card, petrol allowance, travelling allowance or toll payment for official duties, subject to the annual exemption limit and conditions.
3. Is parking allowance fully exempt?
Parking rate and parking allowance are exempt based on the actual amount expended, including parking charges paid directly by the employer to the parking operator.
4. Is meal allowance always tax exempt?
No. Meal allowance is exempt only under the conditions specified by LHDN, such as being provided regularly at the same rate to all employees or being paid for overtime, outstation or overseas duties according to the employer's written policy.
5. Can employers provide more than one tax-exempt mobile phone?
The PCB Specification provides an exemption limited to one unit for each category of asset.
6. Are employee awards tax exempt?
Certain awards (past achievement, service excellence, innovation, productivity and qualifying long-service awards) may be tax exempt up to RM2,000 per year, subject to the stated conditions.
7. Is childcare allowance tax exempt?
Yes, up to RM3,000 per year for children up to 12 years old, subject to the conditions stated in the PCB Specification.
8. Why should employers keep supporting documents?
The PCB Specification specifically requires records for official-duty claims relating to petrol, travelling and toll payments to be retained for 7 years for audit purposes.
Key Takeaway
The 2026 LHDN PCB Specification identifies specific allowances, perquisites, gifts and benefits that may qualify for tax exemption and should be reported in EA Form Part F, subject to the applicable exemption limits and conditions. HR and payroll teams should verify each item against the official requirements before treating it as tax exempt and ensure that supporting documentation is retained where required.