Your LHDN Tax Refund: Timeline, Delays & the 2% Compensation

Why you are owed a refund at all

A refund is simply tax paid in excess of the tax finally assessed. Three things produce it. The most common is PCB: your employer deducts monthly tax using the schedular table, which only knows about the reliefs you have formally told it about, so every relief you claim for the first time at filing — lifestyle, medical, SSPN, insurance, parent care — lands as an overpayment after the fact.

The second is a mid-year change. Resigning, taking unpaid leave, a bonus month that pushed PCB up, or any drop in income after a high-earning first half leaves PCB over-collected against a full-year position that turned out lower.

The third applies to business and rental taxpayers: CP500 instalments are an estimate set in advance, and if the year came in below the estimate, the excess is refundable once the Form B is assessed.

The timeline LHDN works to

LHDN's client charter sets the targets below. They run from the date your return is submitted and assessed — not from the day you decide to chase it — and they are working days, so 30 working days is roughly six calendar weeks, not one month.

Get the bank account right — this is the single biggest cause of delay

Refunds are paid by electronic transfer into a Malaysian bank account, and LHDN will not release money into an account it cannot match to you. The account must be active, held at a Malaysian bank, and in your own name — an account in a spouse's or parent's name, a dormant account, a closed account or a slightly different spelling of your name will all bounce the transfer and leave the refund sitting in your tax account indefinitely.

Your bank details sit in the 'Other Particulars' section of the return, and can also be maintained year-round through the e-Kemaskini service on MyTax. LHDN's own repeated advice is to update them whenever you switch banks rather than at filing time, because a refund that fails to credit is not automatically retried.

The other reasons a refund gets held

• Arrears set-off — if you owe tax for any other year, the refund is applied against that debt first and only the balance is paid out. Check e-Lejar, your tax ledger on MyTax, before assuming the money vanished.
• The return is under review. Large refunds, first-time claims and unusual relief patterns are routinely checked, and the clock effectively restarts if LHDN raises a query.
• Income declared does not match what LHDN already holds. Your employer's Form E and CP8D are filed separately; a mismatch against your declared employment income is a standard trigger for manual verification.
• You filed on paper, or amended the return. Both move you onto a much slower processing path.
• You filed at the deadline. Returns submitted in the last days of April or June join the largest processing batch of the year.

The 2% compensation for a late refund

Section 111D of the Income Tax Act 1967 entitles you to compensation if LHDN holds an overpayment too long. It is 2% per annum on the amount refunded, computed daily, and it is calculated as A × B/C × 2% — where A is the amount refunded, B is the number of days after the 90-day (e-Filing) or 120-day (manual) mark until payment, and C is the number of days in the year.

The eligibility conditions matter more than the rate. You must have filed by the statutory due date, or within the grace period given in that year's Return Form Filing Programme — a late return forfeits the compensation even though it does not forfeit the refund itself. The overpayment must arise from tax deducted or paid under Sections 107, 107B and 107C, which covers PCB and instalment payments. And compensation is not payable where an LHDN audit raises additional tax within the relevant period.

In practice the sums are small on an ordinary salaried refund — 2% a year on RM1,200 is about RM2 a month — but the provision exists, it is paid automatically when due rather than on application, and it is worth knowing about if a five-figure refund has been sitting for a year.

How to check where your refund is

• MyTax (mytax.hasil.gov.my) → Services → Refund Status, using your income tax reference number and identification number.
• e-Lejar, also on MyTax, shows the assessed amount, every payment credited and any arrears the refund may have been set off against.
• Your bank statement — the credit arrives from LHDNM/IRBM and will not carry an explanatory reference, so it is easy to miss on a busy account.
• If the status shows the refund as issued but nothing has credited, the bank details are almost always the problem; correct them on MyTax and contact the LHDN branch holding your file.

Better than a refund: stop overpaying

A refund is not a windfall. It is an interest-free loan you made to the government for up to eighteen months, and the fix is to get your PCB closer to the truth during the year rather than reclaiming it afterwards.

Form TP1 is the mechanism. Submit it to your employer — most will accept it twice a year — declaring the reliefs and rebates you are already certain of, and your employer must factor them into the monthly PCB calculation. Zakat paid through salary deduction and approved donations work the same way.

If you are on CP500 instalments and your year is clearly coming in lower than LHDN's estimate, apply to revise it using Form CP502 by 30 June of that year. That is cheaper than overpaying and waiting, though note the 30% under-estimation penalty cuts the other way if you revise too aggressively.

Important caveats

This guide describes LHDN's published refund process and the general operation of Section 111D of the Income Tax Act 1967; it is information, not tax advice. Processing targets are service standards rather than legal entitlements, and whether compensation is payable in a particular case depends on your filing date, the source of the overpayment and whether your file is under review. Confirm your own position on MyTax or with the LHDN branch holding your file. Use the calculator below to estimate your actual tax for the year — comparing that to the PCB on your Form EA tells you roughly what refund to expect before you file.