All The Benefits You Will Get From Budget 2025 Based On Your Income Group

On the 18th of October 2024, the government tabled Budget 2025. With an allocation of RM421 billion, Budget 2025 continued the trend of each budget being bigger than its predecessors.

Sure, a big budget is good and nice to hear, but what does it have for you? In this article, we’re going to explain what each of the socioeconomic group gets from Budget 2025.

What are the socioeconomic groups of Malaysia?

Although people might say it’s flawed, the government still goes back to the B40, M40, and T20 classification of socioeconomic groups, largely because of a lack of an alternative.

Recently, these categories have also taken into account the Basic Living Expenditure (PAKW – Perbelanjaan Asas Kehidupan Wajar ) based on location and household size. This includes the Main Database System (PADU) which was developed to better allocate the funds from government welfare programmmes.

But what does that actually mean? Here are the explanations.

B40 (Bottom 40%): This group represents the lowest-income households. They often face challenges in accessing essential services and economic opportunities.

M40 (Middle 40%): Comprising the middle-income households, this group typically experiences moderate financial stability but may still face challenges such as rising living costs.

T20 (Top 20%): The wealthiest segment, this group generally enjoys higher disposable incomes and better access to resources. The prime minister further refined this category to the highest T15 tier which he mentioned some subsidies would be reduced to this group.

For a better understanding of which groups you belong to, you can read this article for a more detailed explanation.  So now that we’ve gotten that out of the way, let’s have a look at what each economic group will get, starting with the B40.

What will the B40 get?

Malaysia’s current government has always been very outspoken about their vision and goal for the B40s, and that is to help them live with dignity. Budget 2025 helps them with that vision, through these programmes.

Cash aid programmes

The government announced an increase in direct cash transfers for B40 households, aimed at alleviating financial pressures. For example, Budget 2025 announced that single individuals who are eligible for the Sumbangan Tunai Rahmah (STR) will now get RM600 instead of RM350 that they got in 2024.

Budget 2025 also announced other cash aid and increases to existing cash aids as well, such as a RM100 cash aid per month under the Sumbangan Asas Rahmah programme , up to RM4600. This cash aid will be credited directly into the individual’s MyKad, and recipients will be able to use this money to buy essentials and groceries at partnered supermarkets and shops.

Subsidies for essentials

Although Budget 2025 did say that the RON95 rationalisation initiative will happen in 2025, the government did take the time to assure that the B40 won’t be affected by the subsidy rationalisation.

The government also mentioned that essential food items will not be subject to the new sales tax introduced. There is also the Electricity Bill Rebate Programme of up to RM40 per month for hardcore poor households.

Social welfare assistance

Various assistance targeting hardcore poor families, persons with disabilities (PWDs), and the senior citizens were also enhanced. Among the main highlights are:

• Senior citizens assistance raised to RM600 from RM500 per month
• Child assistance for low-income families increased to RM250 from RM200 for each child aged 6 and below or to RM200 from
• RM150 for each child aged 7 to 18 years old, with a maximum of RM1,000 per family
• Federal Territories, general assistance raised from a minimum of RM100 to RM150, with a maximum of RM500 per family

Healthcare access

The budget includes significant funding for public healthcare services, aiming to provide free or subsidised medical treatments, especially for chronic illnesses.  This will enhance accessibility for B40 families and vulnerable groups.

Among the key initiatives are:

• Allocation for MADANI Healthcare Scheme (Skim Perubatan MADANI)
• Peduli Sihat Kumpulan B40 (PeKA B40) Scheme
• Haemodialysis and peritoneal dialysis services for vulnerable groups
• Expansion of MySalam scheme to cover rare diseases

What will the M40 get?

An expert has stated that with Budget 2025’s announcement, the government is working towards making the socioeconomic distribution shape more like a diamond, instead of a pyramid as it is now.

What this means, is that the government is trying to enlarge the M40 group to make it the biggest socioeconomic group, instead of the B40 as it is right now.

With that being said, here’s what Budget 2025 has in store for the M40;

Tax reliefs

While the M40 might not be eligible for cash aid, the government is still committed to helping the M40 through tax reliefs.

The following tax reliefs coming your way in Budget 2025 are not exclusively for the M40. However, they will be a welcome relief for middle-income earners who are increasing being squeezed on both ends.

• Medical insurance premiums and education tax reliefs amount increased to RM4,000
• Up to RM10,000 in medical expenses tax relief which now includes taxpayers’ medical bill payments under co-payment insurance and takaful products
• Contributions to Private Retirement Scheme (PRS) and premium payments for deferred annuities tax relief extended until tax assessment year 2030
• Skim Simpanan Pendidikan Nasional (SSPN) savings scheme to enjoy tax relief on net savings for three more years

One of the most important examples of a tax relief introduced in Budget 2025 is the first home tax exemption on loan interests of up to RM7,000. This is for homes priced RM500,000 and below.  There is also tax exemption up to RM5,000 for houses within the RM500,001 to RM750,000 price range. This initiative will allow more M40s the opportunity to own homes.

Affordable housing initiatives

Speaking of housing initiatives, the government shows a commitment to increasing the supply of affordable housing units. This is to ensure that M40 families can secure home ownership without excessive financial strain.

Budget 2025 has allocated RM900 million for 48 Program Residensi Rakyat projects (PRR) and 14 Rumah Mesra Rakyat projects. These initiatives will go a long way to ensure adequate housing.

What will the T20 get?

So now we get to the hard part of the article, which is what the T20 gets. Due to the T20 status as the wealthiest people in Malaysia, they typically do not qualify for most government welfare and social outreach initiatives.

However, there are some aspects of the Budget that can be beneficial for the T20s. At the same time, there are also additional taxes to be imposed on them.

Tax incentives for investments

For individuals with overseas income sources that are already taxed abroad, the tax exemption has been extended to December 31, 2026. This benefit is not exclusive to the T20 but those with extra cash to invest abroad will mainly come from this group.

Budget 2025 introduced a proposal to introduce investment tax allowances or income tax exemptions that are aimed at the business sector. The assumption being that those who enjoy the highest incomes are also business owners and investors.

Following is a summary of the key benefits:

• New investment incentives (i.e. supply chain, economic clusters, carbon capture and other ESG investments)
• Global Minimum Tax (GMT) tax incentives
• Duty-free island at Forest City Special Financial Zone (FCSFZ)
• Capital allowances tax incentives for implementation of e-Invoicing
• Income tax exemption for takaful business activities in Labuan
• Increased export incentive for companies engaged in selected service activities
• Fixed rate stamp duty for life insurance and family takaful policies

Other Budget 2025 initiatives to impact the T20

These are not benefits but additional taxes and reduced subsidies such as:

• Dividend tax of 2% on the chargeable dividend income
• RON95 petrol subsidy rationalisation to exclude the T15 from enjoying this subsidy
• Sales tax to be imposed on non-essential imported premium goods
• Service tax (SST) to be widened to include commercial services such as fee-based financial service

Conclusion

Malaysia’s Budget 2025 reflects a commitment to addressing the needs of its diverse population through targeted support for the B40, M40, and T20 groups.

By enhancing welfare programs for the lowest-income households, providing stability and growth opportunities for the middle class, and encouraging investment among the wealthiest, the government aims to foster a more equitable and resilient economy.