Highlights of Budget 2026

KLSE Screener

10 October 2025

Highlights of Budget 2026

Government finances, outlook

Malaysian economy expected to grow 4.0%-4.5% in 2026
Public revenue for 2026 estimated at RM343.1 billion, up from RM334.1 billion in 2025
Federal government outlay totals RM419 billion under Budget 2026, comprising RM338.2 billion in operating expenditure and RM81 billion in development expenditure. Additionally, there will be RM30 billion from GLICs, RM10 billion from public-private investments, and RM10.8 billion from federal statutory bodies and GLCs to fund some measures outlined in the budget.
Fiscal deficit, as a percentage of GDP, targeted at 3.5% in 2026, down from 3.8% in 2025.
New government borrowings are expected to fall further from around RM77 billion in 2025.

Public sector

Sabah and Sarawak to receive the highest development allocations in Budget 2026, amounting to RM6.9 billion and RM6 billion respectively.
Education Ministry to get RM66.2 billion, compared with RM64.2 billion in 2025.
Defence Ministry will receive RM21.7 billion, while Home Ministry will get RM21.2 billion.
RM46.5 billion allocated to the Ministry of Health, up from RM45.3 billion this year.
All Cabinet ministers will continue to take a 20% pay cut, which was first announced in December 2022.
Effective 2026, judges' salaries to be raised 30%; last salary hike was in 2015.
Public servants grade 56 and below will receive a special financial aid of RM500, while pensioners and veterans (both pensioned and non-pensioned) will get RM250, to be distributed in early March 2026.
Public Sector Home Financing Board (LPPSA) financing limit raised to RM1 million to match salary and property price increases.
Nearly RM2.4 billion allocated to Felda, Risda, and Felcra.

Taxes, duties and revenue-related measures

Effective Nov 1, 2025, excise duties on tobacco products will increase by two sen per cigarette stick, RM40/kg for cigars/cheroots/cigarillos, and RM20/kg for the tobacco in heated tobacco products.
Exemption of import duty and sales tax on nicotine replacement therapy products and expands it to include "nicotine mist" and "nicotine lozenges" until Dec 31, 2027.
Also effective Nov 1, excise duties on alcoholic beverages will be increased by 10%.
Carbon Tax to start next year, with an initial focus on the iron, steel, and energy sectors. Its implementation mechanism will be aligned with the National Carbon Market Policy and the forthcoming National Climate Change Bill.
100% exemption on excise duty and sales tax will continue for the purchase of Proton and Perodua cars by taxi drivers and private hire car operators.
Vehicle tax exemption in Langkawi, Labuan to be limited to vehicles valued at no more than RM300,000, effective Jan 1, 2026.
Companies using locally manufactured, MyHIJAU Mark-certified green technology products for Own Use (Kegunaan Sendiri) will be granted a 100% green investment tax allowance.
Tax deductions of up to RM500,000 will be given for renovation and refurbishment of business premises by tourism project operators.
A special RM1,000 individual income tax relief will be granted for expenses covering entrance fees to local tourist attractions and cultural programmes to encourage domestic travel.
Individual income tax relief for expenses on screening, detection, early intervention, and continuous rehabilitation for disabled children (age 18 and below) to be raised from RM6,000 to RM10,000.
The RM2,500 individual tax relief — currently given for spending on electric vehicle charging facilities and the purchase of food waste composting machines — to be extended to cover purchases of food waste grinder and closed-circuit television cameras or CCTV for household use; the claim is allowed once from 2026-2027.
The RM3,000 individual tax relief for childcare fees (nursery/kindergarten up to age 6) will be expanded to cover registered day care/transit centres for children up to age 12, effective for year of assessment 2026.
Vaccination expenses eligible for individual income tax relief to be expanded to cover all types of vaccines registered and approved by the Ministry of Health.
A special 10% tax deduction (capped at RM10 million) will be offered for expenses related to converting commercial buildings into residences.
Flat stamp duty of 4%-8% to be imposed on property transfers involving non-citizens and foreign companies, except permanent residents.
Full stamp duty exemption on transfer and loan agreements for first homes (priced up to RM500,000) extended until Dec 31, 2027.
The application period for income tax exemption for social enterprises to be extended until 2028.
The existing RM3,000 tax relief for life insurance/takaful premiums (self and spouse) will be extended to cover children.
Full stamp duty exemption on small-value insurance policies or takaful certificates purchased by individuals and micro, small and medium enterprises (MSMEs) extended for another three years until 2028. Similar extension given to full stamp duty exemption on insurance policies and takaful certificates for Perlindungan Tenang products.
New companies involved in food production will get a 100% income tax exemption on statutory income for 10 years, while existing companies expanding their projects will get the full exemption for five years. Application period for these tax incentives extended until end-2030.
Additional 50% tax deduction for small and medium enterprises (SMEs) on expenses for certified training related to AI and cybersecurity
Venture capital tax incentives strengthened for next 10 years via special tax and dividend exemptions.
Companies and individuals contributing to government community programmes eligible for income tax deductions.
E-invoice initiative to be fully implemented in 2026, along with the self-assessment system for stamp duty to foster tax compliance; refunds of overpaid taxes will be expedited.

Business, investments and strategic projects

Government loan facilities and guarantees for local entrepreneurs raised to RM50 billion from RM40 billion. Over RM2.5 billion in microfinancing will be channelled through Bank Simpanan Nasional (BSN) and National Entrepreneurial Group Economic Fund (Tekun).
Government to add 50 acres of Malay Reserve Land in Bandar Malaysia. Petronas, as the landowner of Bandar Malaysia, is drawing up a development plan and will begin the first phase of development by the end of 2026.
UDA Holdings Bhd will spearhead wakaf land development in Penang with projects worth nearly RM250 million, including Taman Wakaf Seetee Aisah Phases 2 and 3, and Taman Sultan Sallehuddin Phases 1B and 2B.
Ekuiti Nasional Bhd to grow its investee companies until they can be listed and taken over by Permodalan Nasional Bhd.
RM100 million to be spent to rehabilitate problematic paddy fields, upgrade infrastructure, and encourage adoption of modern rice field technologies.
The Outcome-Based Incentive Framework, which focuses on high-growth activities, will be fully implemented in the manufacturing sector in the first quarter of 2026, followed by the services sector in the second quarter.
Syarikat Jaminan Pembiayaan Perniagaan Bhd to set aside RM5 billion to guarantee up to 70% of financing for export-oriented mid-tier companies. It will also double government guarantees for halal-business loans to RM2 billion from RM1 billion.
The MATRADE Market Development Grant to provide RM60 million to facilitate SMEs in exporting Malaysian-made products to existing and new markets, including Africa, Latin America, and Central Asia.
EXIM Bank to offer RM500 million in soft loans to assist companies affected by global trade tariff tensions.
To boost R&D commercialisation, public university lecturers who found spin-off companies can take a one-year research/sabbatical leave.
RM10 million to be set aside for seed funding to establish a National Spin-off Fund.
The government will introduce the Asean Business Entity status, coordinated by the Securities Commission Malaysia. This status will be given to public-listed companies with extensive market footprint in Asean, and mid-tier companies with the potential to expand operations.
NIMP Industrial Development Fund to allocate RM180 million to finance industrial development programmes in high-impact sectors, including pharmaceuticals, semiconductors, AI, digital, and sustainability.
Khazanah Nasional Bhd and KWAP invest RM550 million in the semiconductor ecosystem to enhance joint ventures between local firms and multinational companies.
Through the GEAR-uP initiative, GLICs will increase domestic investment to RM30 billion, compared to RM25 billion this year.
RM40 million to be spent to help high-potential Bumiputera companies scale up.
Cradle Fund, with a fund of RM55 million, will implement the Equity Investment Programme and the GLC Innovation Workshop, which will be expanded to the private sector.
Effective 2026, the salary threshold for stamp duty exemption on employment contracts will increase from RM300 to RM3,000 per month to reduce the cost of doing business.

Infrastructure, connectivity and regional collaborations

RM2 billion allocated for Madani Submarine Cable Connection or Salam, to be developed by the Malaysian Communications and Multimedia Commission (MCMC); this 3,190km network will connect Sedili in Johor to key areas in Sarawak (Kuching and Sibu) and Sabah (Tuaran, Kudat, Pulau Banggi, Sandakan and Tawau).
MCMC to invest RM2 billion to build sovereign artificial intelligence (AI) cloud.
Southern Link Transmission Line project gets RM765 million allocation.
Pengurusan Aset Air Bhd to invest up to RM13 billion over the next five years in several water treatment plants, including the Langat 2 Water Treatment Plant (Selangor), LRA Machang (Kelantan), and the Sungai Karangan and Sidam Kiri plants (Kedah).
RM3 billion to be spent to replace over 820km of ageing pipes across Johor, Melaka, Negeri Sembilan, Kelantan, Pahang and Selangor under the National Non-Revenue Water programme.
RM2.5 billion allocated for the maintenance of federal roads, including resurfacing potholes, installing streetlights in high-risk areas, and replacing road furniture.
RM3.3 billion set aside for basic rural infrastructure projects, including RM2.5 billion for rural and village roads, RM700 million for supply of clean water and electricity, and RM90 million for streetlights.
RM5.6 billion in Malaysian Road Records Information System (MARRIS) grants allocated to states for the maintenance of state roads nationwide.
Border infrastructure to be improved, including new road from Kalabakan to Simanggaris and upgrade of Pasir Mas-Rantau Panjang railway line.
Jeniang Water Transfer Project, to cost RM1.28 billion, to commence next year.
The Inter-Terminal Transfer project between KLIA Terminal 1 and Terminal 2 will be implemented to enhance passenger connectivity.
Airport upgrades in Penang, Sabah, and Sarawak get RM2.3 billion, to be completed by 2028
RM770 million to complete Phase 2 of Point of Presence near industrial areas and selected rural schools.
Broadband coverage will expand to 2,700 new locations under the JENDELA 2 project with RM780 million.
Tenaga Nasional Bhd (KL:TENAGA) and Petronas are collaborating with Asean partners to accelerate the Vietnam–Malaysia–Singapore Project, which will transmit renewable energy from southern Vietnam to Malaysia and Singapore.
The National Energy Transition Roadmap continues to be driven by industry players, with the support of the National Energy Transition Fund worth RM150 million.
The large-scale solar generation projects implemented under the LSS 6 programme with a capacity of nearly 2GW will involve an estimated private investment of RM6 billion.
GLICs and GLCs are mobilising investments valued at RM16.5 billion for 2026 for energy transition. UEM Lestra is developing solar farms in Segamat, Melaka, and Selangor and is collaborating with PLUS to expand EV charging facilities.
An additional 300MW renewable energy quota allocated under the Feed-In Tariff programme, with expected operation to start as early as 2028.

Aid, social welfare and cost of living measures

A one-time Sumbangan Asas Rahmah (Sara) RM100 payment will be given again to 22 million Malaysians aged 18 and above in mid-February next year
All nine million Sumbangan Tunai Rahmah (STR) recipients to receive Sumbangan Asas Rahmah (Sara) assistance of up to RM100 per month, or RM1,200 per year. One million STR recipients under the e-Kasih programme will also receive up to RM200 per month, or RM2,400 annually, under Sara.
Single individuals will receive RM600, equivalent to RM50 per month. The maximum household benefit stands at RM4,600 — comprising RM2,200 in STR and RM2,400 in Sara — for households earning below RM2,500 per month with five children.
In conjunction with Deepavali, the RM2 billion Sumbangan Tunai Rahmah (STR) Phase 4 payment for 2025, originally scheduled for November, will be brought forward and disbursed starting Oct 18
Cost of living aid for 4,000 Jabatan Kemajuan Masyarakat contract retirees raised from RM300 to RM500 per month.
Paddy farmers to get record RM2.62 billion in various subsidies and assistance; Agrobank will provide RM1.1 billion in financing to help entrepreneurs expand businesses and support automation and mechanisation in agriculture projects.
Govt allocates close to RM120 million to protect the welfare of smallholders, including to subsidise the cost of replanting to replace old oil palms, and supplying cocoa smallholders with high-quality seedlings.
MySalam will be extended into 2026, offering continued subsidised protection for hospitalisation and critical illnesses to low-income households.
Owners scrapping a vehicle over 20 years old for a new national car purchase will receive a government/automaker matching grant of up to RM4,000.
Innovative tokenized cash wakaf sukuk will be introduced to finance critical needs, including special education, autism centres, and palliative care facilities in Malaysia. This allows individual contributions to be converted into sustainable financing for social development.

Education, health and security

RM120 million to be set aside annually for PTPTN's free education scheme, benefiting 5,800 children from poor families in public universities.
PTPTN loan repayments for first-class honours graduates from low- and middle-income families will be exempted. This benefits about 6,000 borrowers and costs RM90 million annually.
Travel restrictions to be imposed on PTPTN borrowers working overseas who are able to pay but fail to make loan repayments.
All government hospitals and clinics will undergo maintenance and repairs with an allocation of RM1.2 billion.
Private hospitals will be allowed to establish tax-exempt Hospital Welfare Funds to aid underprivileged patients; contributors will receive tax deductions.
Consultation fee rates for general medical practitioners revised to RM10-RM80 from RM10-RM35. On-Call Allowance raised by about 40% from Oct 1, 2025, with an additional allocation of RM120 million annually.
A total of 4,500 contract doctors have been approved and will be offered permanent positions next year.
Over RM1.5 billion to build and upgrade facilities for uniformed agencies, and RM1 billion for new procurements, including 100 pickups, four patrol boats, and one surveillance aircraft.
RM6 billion for defence assets, including air defence systems, two support ships, and 10 MALBATT vehicles.

Gig economy, workers’ welfare, and human capital

Gig workers, including e-hailing and p-hailing riders, to get matching contribution incentives of up to RM600 annually or RM6,000 over a lifetime under the i-Saraan Plus scheme. Other informal and self-employed workers will continue to get up to RM500 per year or RM5,000 over a lifetime.
For gig workers in non-mandated sectors, the government will subsidise the Self-Employed Social Security Scheme contribution by 70% for the first year and 50% for the second year.
EPF withdrawal limit for hajj raised to RM10,000, from RM3,000.
National TVET Council to receive additional funding, with HRD Corp allocated RM3 billion for digital and technology training and PTPK offering RM650 million in financing.
RM7.9 billion set aside for technical and vocational education and training or TVET, up from RM7.5 billion.

Tourism, urban development

Visit Malaysia Year 2026 aims to attract 47 million visitors and generate RM329 billion in tourism revenue
Over RM700 million allocated to boost the tourism sector.
DBKL is allocating RM500 million for urban improvements: RM200 million to redevelop old hawker facilities (centres, markets, food courts), and RM300 million for maintenance of buildings, wiring, and road facilities within People’s Housing Programme (PPR) schemes.
RM76.6 million allocated to upgrade urban transformation centre facilities.
Khazanah is investing RM600 million to restore Carcosa Seri Negara.
RM60 million allocated to build stalls, repair public markets across all local authorities.
Majlis Amanah Rakyat (Mara) will spend RM50 million to upgrade 363 Mara business premises nationwide, benefiting 7,300 entrepreneurs.

Youth and rural outreach

RM1 billion from subsidy savings will go to fund Ikhtiar Madani, giving village committees up to RM100,000 and involving youth in income-generating projects like vending machines and farming.
Promotion of youth entrepreneurship: RM150 million financing from Bank Simpanan Nasional for entrepreneurs aged 30 and below; RM12 million from SME Corp’s Tunas Usahawan Belia Bumiputera programme for training and business support; support for low-income youth by covering fees for B2 motorcycle licences to help them join delivery services.
RM250 million to be spent on the National Service Programme in 2026, including piloting it in universities, before a full launch in 2027.
The Rakan Muda programme will be reintroduced with RM40 million allocation to be spent on programmes to help marginalised rural youth.
From 2026, youths will be classified as those aged between 15 and 30.

Disaster management

RM2.2 billion is set for 43 flood mitigation projects, including 12 new ones next year.
National Disaster Management Agency will spend RM460 million to build 10 toilet complexes with clean water at evacuation centres.
Over RM260 million for slope maintenance and repairs nationwide, including federal roads.
MCMC allocates RM210 million to develop an Early Warning System for better disaster preparedness.
The GLC and GLIC Disaster Response Network provides RM20 million in matching grants to help disaster victims.
RM55 million to clean and upgrade drains in all local authorities.

Governance, enforcement, consumer protection

Consumer Protection Act to be amended to include Lemon Law elements, to improve consumer protection.
Enforcement agencies allocated RM700 million for training and asset acquisition.
The MyDigital ID initiative will be expanded to the financial, telecommunications, e-commerce, and healthcare sectors.
Parliament to receive nearly RM220 million, with RM5 million earmarked to enhance Dewan Rakyat’s check-and-balance function over government policies.
Customs Department to introduce digital tax stamps with enhanced security features to curb counterfeiting while addressing leakages at the country’s entry points through the Centralised Screening Complex CCTV system.

(Web Source: https://www.klsescreener.com/v2/news/view/1601701/Highlights_of_Budget_2026)