Zakat Pendapatan: Income Zakat in Malaysia (2.5% & the Tax Rebate)

Income zakat is separate from savings zakat

Zakat on savings (zakat simpanan) is charged on the wealth you have held for a full year. Zakat pendapatan is charged on the income you receive — salary, bonuses, allowances, professional and business income, and often rental and other earnings. Because the two are assessed on different bases, paying one does not settle the other: money you earn is subject to income zakat in the year it is received, and whatever of it you keep can later attract savings zakat once it has sat with you for a haul.

The rate is the same 2.5% (one-fortieth) used across most monetary zakat, and zakat pendapatan only applies once your annual income reaches the nisab — the threshold pegged to the value of 85 grams of gold, which each state zakat authority republishes as the gold price moves. If your yearly income never reaches nisab, no income zakat is due.

Two methods: gross income vs after basic needs

States and zakat bodies allow (and sometimes prefer) one of two ways to work out the zakatable base. The method you use changes the figure, so check what your own state authority applies:

Pay it monthly and cut your PCB

You do not have to pay income zakat as one lump sum. Most Malaysian employees arrange a monthly salary deduction (potongan gaji zakat) through their employer or directly with the state authority, which spreads the obligation across the year like any other payroll deduction.

There is a real cash-flow benefit to doing it this way: monthly zakat paid through salary deduction is recognised in LHDN's monthly tax deduction (PCB / MTD) formula, so your monthly tax withheld drops by roughly the zakat you pay. In effect you redirect part of what would have been PCB into zakat, month by month, rather than waiting until you file. See how PCB is worked out with the take-home salary calculator and its PCB guide.

It is a rebate against your income tax

As with all zakat paid to an approved religious authority, zakat pendapatan is a rebate under Section 6A(3) of the Income Tax Act 1967 — it is subtracted directly from the tax you owe, ringgit for ringgit, not merely deducted from chargeable income the way a relief is. RM1,000 of zakat cancels RM1,000 of tax outright.

For many Muslim taxpayers this reduces income tax payable close to, or all the way to, zero, so the zakat effectively costs nothing beyond tax that would have been paid anyway. The rebate can only reduce tax down to nil — it never produces a refund larger than the tax charged, and any excess is not carried forward.

Worked example

Take an annual income of RM60,000, comfortably above nisab. Using the gross method, income zakat is 2.5% × RM60,000 = RM1,500 for the year, or RM125 a month if paid by salary deduction.

Suppose your income tax payable for the year works out to RM2,000. The RM1,500 zakat is claimed as a rebate, so tax drops to RM2,000 − RM1,500 = RM500. You paid RM1,500 to your state zakat authority and RM500 to LHDN — RM2,000 in total either way, but RM1,500 of it went to zakat. If instead you used the net-after-basic-needs method and your allowed deductions brought the base down to, say, RM40,000, zakat would be 2.5% × RM40,000 = RM1,000, and the rebate would reduce your tax to RM1,000.

Important caveats

Zakat is a religious obligation whose detailed rules — the exact nisab, whether the gross or net method applies, and which deductions are allowed — are set by each state authority and change with the gold price and annual reviews. This guide is a planning overview of zakat pendapatan; this site's calculator computes zakat on savings, not income. Always confirm the current nisab and method with your approved state body (for example PPZ-MAIWP, LZS or your state zakat centre), pay through it so the payment qualifies for the tax rebate, and keep the official receipt for your e-Filing.