The Government gazetted the Income Tax (Deduction For Payment Of Care Allowance Of Parents and Grandparents) Rules 2026 [P.U.(A) 231/2026] on 26 June 2026. This legislation allows employers in Malaysia to claim a special tax deduction for providing care allowances to the employees’ elderly relatives. These rules are deemed to have effect from the Year of Assessment 2025.
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Scope of the Deduction
A resident employer in Malaysia may claim a tax deduction for expenses incurred in providing care allowance to employees for the care of their:
(1) parents;
(2) adoptive parents; or
(3) grandparents.
While the Rules do not define these relationships, employers should follow general Malaysian tax compliance principles. “Parents” refers to natural parents or foster parents where the individual is an adopted child, and “Grandparents” refers to the parents of an individual’s parents. The parents, adoptive parents and grandparents must be resident in Malaysia.
The amount of deduction allowed under these Rules shall be in addition to any deduction permitted under Section 33 of the Income Tax Act 1967. This means employers are eligible to enjoy an extra tax benefit beyond the standard deduction for employees.
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Amount of Deduction and Restrictions
The Rules do not specify a fixed monetary amount for this additional deduction. The Director General of Inland Revenue has the authority to review the allowance amount. If the total expenditure exceeds what is deemed reasonable or typical within ordinary course of business operations, the excess amount will be disallowed.
Additionally, should there be two basis periods overlapping, the common period for both periods shall be deemed to fall in the first basis period only to avoid the same expenses being claimed twice.
For further information, please visit the official website of the Inland Revenue Board of Malaysia at
https://www.hasil.gov.my/en
KAIZEN Group, together with its associate firms in Malaysia, can help the clients to perform these compliances formalities so as to maintain the Malaysia company in good standing. Please call and talk to our professional accountants in Kaizen for further clarification.
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