Employee Allowances Tax Malaysia 2026: Which Are Taxable? (Full Guide)

Is car allowance (elaun kereta) taxable in Malaysia?

It depends on the form: (1) Cash car allowance — e.g. 'RM 500/month car allowance' added to your payslip — is TAXABLE employment income and should appear in your Form EA B1 or B2. (2) Petrol reimbursement for official duties (you submit receipts and your employer reimburses the actual amount) — is EXEMPT from tax, up to the actual amount. (3) Travelling allowance for official duties using your own car — the first RM 6,000 per year is EXEMPT under Section 13(1)(a). (4) Employer provides a company car — BIK (Nilai Manfaat), appears in Form EA B3 at the LHDN prescribed value. If your employer gives you a flat monthly cash amount labeled 'car allowance' without requiring receipts, treat it as taxable and verify it is included in your Form EA.

Is the RM 6,000 travelling allowance exemption automatic or do I need to claim it?

The RM 6,000 per year travelling allowance exemption (Section 13(1)(a)) is applied by your employer before they prepare your Form EA — it should NOT appear as income in your Form EA B1 if your employer correctly excluded it. You do not claim this exemption yourself in e-Filing. However, if your employer incorrectly included your official-duty travelling allowance in your Form EA B1 as taxable income (up to RM 6,000 worth), you would need to consult your HR department for a corrected Form EA. The exemption applies to allowances given for using your own vehicle for official duties — it does not apply to personal commuting allowances.

Is housing allowance taxable in Malaysia?

Yes. Cash housing or accommodation allowances (e.g. 'RM 1,000/month housing allowance') are taxable employment income in Malaysia. They should appear in your Form EA under B2 (Perquisites). If your employer provides a free house or subsidised accommodation, the taxable value is the annual rental value of the premises minus any amount you contribute toward rent — and this appears in Form EA B3 as BIK. There is no exemption for cash housing allowances, unlike the RM 6,000 travelling allowance exemption. If your Form EA B2 shows a large amount you did not expect, it often reflects housing or accommodation allowances.

Is meal allowance (elaun makan) taxable in Malaysia?

Meal allowances paid for official duties during working hours are generally EXEMPT from tax if they represent a reasonable amount for the actual cost of meals. This exemption covers allowances given for meals during overtime, official business travel, or site work — not a general cash supplement added to monthly salary. If your employer pays a flat 'meal allowance' of RM 200/month added directly to your payslip without requiring work-related travel, it is likely taxable perquisite income and will appear in Form EA B2. Check whether your employer has excluded it from B1/B2 — if it is absent from your Form EA entirely, your employer has treated it as exempt.

Is phone or communication allowance taxable in Malaysia?

Cash phone allowances (e.g. RM 100/month phone allowance on payslip) are taxable perquisites — they should appear in Form EA B2. However, if your employer provides a company-owned mobile phone and pays the bill directly for business use, this is exempt from tax as a 'benefit in kind' for official use — and it will either not appear in Form EA or appear at zero value in B3. The distinction is ownership: company-owned device + company pays bill = exempt. Cash payment to you = taxable. If you receive a fixed monthly phone allowance without submitting receipts, it is taxable.

How do I know if my allowances are correctly handled in my Form EA?

Check your Form EA sections: B1 = gross salary (everything taxable), B2 = perquisites (taxable allowances and benefits), B3 = Nilai Manfaat/BIK (company car, subsidised housing, subsidised loan). Your employer should have excluded the following from B1/B2: official-duty travelling allowance up to RM 6,000/year, actual meal expense reimbursements for official duties, actual petrol reimbursements for official duties. If you received large allowances in 2025 but your Form EA B2 is RM 0 when you expected allowances to be there, ask HR to clarify how they classified each allowance. Miscategorised allowances benefit or penalise you depending on the direction.

What happens if I had allowances in 2025 that were not declared in my Form EA?

If you received cash allowances that should be taxable (housing, phone, vehicle) but your employer did not include them in your Form EA B1 or B2, you are technically underdeclaring income. You should contact your HR or payroll department for a corrected Form EA. Filing with an incorrect Form EA can lead to an LHDN audit later — Section 113 (incorrect return) carries a RM 200–20,000 fine and up to 300% additional tax. If you are unsure, the VDP (Voluntary Disclosure Programme) is a proactive option — 15% penalty vs up to 300% on audit. When in doubt, declare the full amount.