Many parents, alumni and businesses want to support their local schools but are not sure how the tax rules work. Budget 2027 puts the spotlight on the School Public Contribution Fund (Tabung Sumbangan Wang Awam Sekolah, or TSUWAS) and makes it more useful for schools.
What is not new: the 10% deduction
Individuals and companies that make cash contributions to an approved School Public Contribution Fund can claim a tax deduction of up to 10% of their aggregate income. This deduction already exists, and Budget 2027 keeps it in place.
Aggregate income is your total income from all sources for the year, before donations and tax reliefs are taken off. For example, if your aggregate income is RM100,000, the most you could deduct for qualifying school donations is RM10,000.
What is new: how schools can use the money
Under Budget 2027, the fund will be improved so that voluntary contributions from parents, alumni and the community can be used for a wider range of purposes, including:
- school operations and administrative expenses
- repairs and maintenance of facilities
- purchase of equipment
- student programmes
This is proposed to take effect from the 2027 year of assessment, and the aim is to encourage greater community involvement in creating better school environments. The change comes alongside a doubling of the government’s allocation for school repairs and maintenance to RM2 billion.
What qualifies for the deduction
- Cash only. Donations in kind, such as equipment or materials, do not qualify.
- An official receipt. Only cash donations supported by an official receipt from the school are allowed.
- An approved fund. The donation must go to a fund that is approved under the Income Tax Act, which means the receipt should reference the approved fund.
An illustration
Suppose a parent with aggregate income of RM100,000 donates RM2,000 in cash to an approved fund and their top tax rate is 18%. The deduction reduces their tax by roughly RM360 (RM2,000 × 18%). This is our own illustration. The actual saving depends on your income and tax bracket.
Two points to be aware of
- Direct donations to school boards. The deduction is for the approved fund. Some education groups have pointed out that donations made directly to school boards of governors, such as those of Chinese schools, are not treated in the same way, and have asked the government to give them equal treatment. This is not part of the announced measure at this stage.
- Public universities. Separately, Budget 2027 also says donations to public universities qualify for a deduction of up to 10% of aggregate income.
What to do now
- Check that the fund is approved. Ask the school to confirm in writing before you give.
- Give in cash and get an official receipt. Keep it with your tax records.
- Plan your giving. If you donate regularly, see how much of your 10% cap you use across all deductible donations in a year.
- For companies, review your policy. Check how school donations fit within your overall corporate giving.
- Wait for final guidance on how the wider use of funds will work.
Speak to AdrianYeo Tax
Charitable giving can be tax-efficient when it is done properly. Our chartered accountants can help you plan your donations and keep the right documents.
This article is for general information only and does not constitute tax advice. Measures are based on Budget 2027 announcements and may change when the legislation is finalised. Please consult a tax professional about your specific circumstances.
