How much can our donors deduct? What to tell donors about tax relief on their gifts

"But it's tax-exempt!" — what your donors actually get

Sooner or later a donor calls, having just given RM2,000 to your building fund, asking why their tax bill didn't drop by RM2,000. This is the single most common misunderstanding around donation tax relief, and it isn't the donor's fault — "tax-exempt receipt" and "tax deduction" sound like they mean the same thing as "you get your money back."

They don't. A deduction reduces the income that gets taxed, not the tax itself. Your donor's RM2,000 gift comes off their aggregate income before their tax is calculated ^[1][3]. What they actually save depends on the tax bracket that RM2,000 would otherwise have sat in — for a resident individual under LHDN's own schedule for the year of assessment, that's anywhere from 0% (income too low to be taxed at all) up to 30% at the top band ^[4]. A donor taxed at the 25% band who gives RM2,000 saves roughly RM500 in tax — not RM2,000.

This is different from a rebate, which comes off the tax bill directly, ringgit for ringgit. Zakat and fitrah payments are the clearest example of a rebate in this space, dealt with separately under subsection 6A(3) of the Act ^[4] rather than under subsection 44(6). We cover that distinction properly in Zakat, sadaqah and general donations: why the receipt differs — if your organisation collects zakat as well as general donations, that's the article to read.

Practical tips:

• Never tell a donor their donation is "fully tax-exempt" or implies a refund. Say what's true: "This gift qualifies for a tax deduction under our LHDN approval, which reduces your taxable income."
• If you want one sentence you can reuse in a thank-you email or on a receipt, try: "This donation may be deducted from your income in your annual tax filing, subject to LHDN's conditions and the applicable limit for the year of assessment; the actual tax saving depends on your own tax rate. This is not tax advice — please confirm with LHDN or your tax adviser."
• Don't attempt to calculate a donor's tax saving for them. You don't know their other income, reliefs or filing status, and getting it wrong is worse than saying nothing.

How much an individual donor can actually deduct

The admin who fields this question is usually being asked it by a donor mid-way through filling in their e-Filing return, wanting a number before they submit. Here's the actual mechanic, from LHDN's own current ruling on the subject.

Under the proviso to subsection 44(6) of the Income Tax Act 1967, a cash gift to a government body, state government or local authority is deductible in full, with no cap. A cash gift to an institution, organisation or fund that LHDN has separately approved under 44(6) — which is what applies to almost every NPO — is deductible too, but restricted to 10% of the donor's aggregate income for the year ^[1][2][3].

That 10% is not a separate allowance for every kind of gift. LHDN's current Public Ruling on the subject — Public Ruling No. 7/2025, Taxation of a Resident Individual Part I: Gifts or Contributions and Allowable Deductions, published 5 December 2025 — is explicit that the 10% ceiling is one shared pool across four categories of gift: subsection 44(6) (general approved-body donations), 44(11B) (Minister-approved sports activities), 44(11C) (Minister-approved national-interest projects) and 44(11D) (wakaf to an approved religious authority, or endowment to a public university) ^{[3, §5.2.7–5.2.9]}. A donor who gives to more than one of these in the same year doesn't get 10% four times over — they share one 10% of aggregate income between them.

A handful of other gift categories sit outside that shared pool with their own separate allowance: an artefact, manuscript or painting given to the Government (valued by the Museums Department or National Archives, no percentage cap), a painting to a national or state art gallery (same basis), a cash gift for public library facilities (capped at RM20,000), a gift for public facilities for disabled persons (valued by the local authority), and cash or medical equipment given to an approved healthcare facility (capped at RM20,000) ^{[3, §5.2.2–5.2.6]}. Only cash counts for the subsection 44(6) deduction itself — a donation of food, goods or equipment doesn't qualify for the general 10% deduction, though a few of those separate categories above do have their own in-kind allowance. We cover in-kind gifts properly in In-kind donations and tax receipts.

Worked example (individual, shared-pool case). Say a donor's aggregate income for the year is RM150,000. In the same year they give RM8,000 cash to your organisation's approved building fund (44(6)), RM3,000 to a Minister-approved sports programme (44(11B)), and RM2,000 as wakaf to an approved religious authority (44(11D)) — RM13,000 in total. The shared ceiling is 10% × RM150,000 = RM15,000, so all RM13,000 is deductible this year; if the total had instead been RM17,000, only RM15,000 of it would have qualified, and the excess simply isn't deductible that year (the Act gives no mechanism to carry an unused donation deduction forward to a later year).

Practical tips:

• If a donor asks whether their gift is "on top of" their other donations for the 10% purposes, the honest answer is almost always no — point them to LHDN's own explanation and, if they need certainty, their tax adviser. You don't know what else they gave this year.
• Keep your organisation's own approval status current in DonorCARE (see below) so a campaign only shows as tax-deductible when it genuinely is.

Companies give too — and the same 10% applies

LHDN's own explanatory note on donation receipts states plainly that the 10%-of-aggregate-income cap applies "to individuals and companies" alike ^[2]. The mechanics of Public Ruling No. 7/2025 above are written for resident individuals specifically — LHDN has not published an equivalent detailed ruling for corporate donors — but the underlying statutory limit in subsection 44(6) is the same figure, because the Act's "person" includes a company.

What differs for a company is the tax rate the deduction is worth. Most Malaysian resident companies pay a flat 24% rate; a qualifying small or medium company (paid-up capital of RM2.5 million or less and gross business income of RM50 million or less) pays 15% on its first RM150,000 of chargeable income, 17% on the next band up to RM600,000, and 24% above that ^[5]. So a RM10,000 deductible donation is worth roughly RM1,500 to RM2,400 in tax saved to the company giving it — again, not RM10,000 back.

Corporate donors also come with a documentation step your team needs to get right: LHDN e-invoicing and a tax-deductible receipt both need the donor's Tax Identification Number (TIN), and a company's TIN (the ones starting with "C") has to be recorded against a Business Registration identity, not a personal one — DonorCARE won't let you save the wrong pairing (see Manage donor tax profiles). If a corporate donor asks how the two categories of gift they made interact under the 10% cap, or whether a specific structured gift qualifies under 44(11B)–(11D), that's a question for their own tax adviser or LHDN directly — it isn't something your organisation can rule on for them.

Practical tips:

• Collect the donor's correct identity type and TIN at the time of the gift, not months later when they're chasing a receipt for e-Filing — it's much harder to get a company's finance team to respond once their own filing deadline has passed.
• If a company donor gives through a foundation or CSR arm with its own registration, the TIN belongs to whichever entity actually made the payment.

Where this goes on the tax return

The admin who gets this question is usually being asked "which box" — not "what's the law." For an individual e-Filing on Form BE (employment income, no business income), donations sit in their own part of the form, separate from personal reliefs: Part F, "Donations / Gifts / Contributions" in LHDN's own Explanatory Notes for the year of assessment. The row for a gift to a DGIR-approved institution is explicitly captioned as restricted to 10% of the aggregate-income figure entered earlier on the same form, and the e-Filing system applies that cap automatically once the aggregate income figure is in ^[4]. Form B, used by individuals who also have business income, follows the same lettering convention across LHDN's individual forms, though we haven't independently verified its exact item reference for this year — if your donor uses Form B, the same 10%-of-aggregate-income principle applies regardless of which box it lands in.

Zakat and fitrah, by contrast, don't go in the donations part of the form at all — they're claimed in the rebates section further down, under a completely separate calculation that comes off the tax payable rather than the income ^[4].

Practical tips:

• If a donor asks "which form," the honest answer is that it depends on their own income sources, not on your organisation — direct them to LHDN's e-Filing guidance or their own tax adviser rather than guessing.
• Your receipt doesn't need to tell a donor which box to use. It needs your approval details, the amount, and the date — covered fully in What must be on a valid donation receipt.

Keeping the paperwork — for the donor, not just for you

Every February to April, the same pattern repeats: a donor who gave in, say, March last year can't find the receipt, and your office fields the request while everyone else is also asking for theirs. LHDN's own e-Filing guidance answers how long a donor needs to keep it: seven years from the end of the year the tax return was filed, for reference if LHDN ever asks ^[4]. That's the donor's obligation, not yours — but a lost receipt becomes your problem the moment they call.

Practical tips:

• Tell donors up front, in your thank-you email or on the receipt itself, that they can re-download it anytime rather than needing to keep a paper copy safe for seven years.
• If a donor's details were wrong on the original receipt — a misspelled name, a wrong amount — fix the donation record and resend rather than trying to issue a "corrected" version by hand; see Where DonorCARE fits below.

What this means for your organisation

1. Never describe a donation as "tax-free" or promise a specific saving. It's a deduction against income, not a refund — the actual saving depends on the donor's own tax position, which you don't know.
2. Only issue a tax-deductible receipt for cash gifts, and only while your 44(6) approval is current. In-kind gifts need a different treatment — see the dedicated article.
3. Remember the 10% cap is shared across 44(6)/(11B)/(11C)/(11D) for an individual donor, not a fresh 10% for each. You can't calculate this for a donor without knowing their other giving — don't try.
4. Collect a corporate donor's TIN and correct identity type at the time of the gift, not when they chase you for e-Filing season.
5. Point donors to LHDN and their own adviser for anything beyond "here is your receipt." Calculating a specific tax saving, or ruling on how multiple gift categories interact, isn't your organisation's job or liability to carry.
6. Tell donors their receipt is always available to re-download, so "I lost my receipt" doesn't become a February scramble.