KUALA LUMPUR: The government is considering using Net Disposable Income (NDI) to determine who qualifies for welfare assistance, moving toward a more precise model than the traditional gross income brackets of B40, M40, and T20.
In a parliamentary written reply dated July 13, the Economy Ministry stated that while these legacy classifications remain in use for socio-economic analysis, a fairer approach is needed to reduce the risk of vulnerable households being excluded from aid.
Unlike standard gross income, the NDI model aims to reflect a household’s true financial health by factoring in localized living costs, spending patterns, and regional demographics.
According to the ministry, NDI is calculated in two stages. First, Gross Income is reduced by statutory deductions such as Employees Provident Fund (EPF) contributions, SOCSO, income tax, and zakat to determine Disposable Income. Second, that amount is further reduced by the essential expenditures required to maintain a decent standard of living. The remaining balance represents the actual money a household has left for savings or discretionary spending.
However, the ministry cautioned that an overhaul of the national income classification framework requires further study and comprehensive data. The government aims to ensure effective implementation under the Thirteenth Malaysia Plan (13MP), which spans 2026 to 2030, and is currently engaging with relevant agencies to explore potential pilot projects.
The ministry was responding to a question by Datuk Seri Ismail Sabri Yaakob (BN-Bera) on whether the government is reviewing the income thresholds, given that the current classifications no longer reflect economic reality.
Malaysian households are generally classified into the broad B40, M40, and T20 brackets, or further segmented into ten percentile groupings ranging from Decile 1 (D1) to Decile 10 (D10). These official benchmarks rely on the Household Income and Expenditure Survey (HIES), which is conducted twice every five years.
Data from the latest HIES, carried out in 2024 and published by the Statistics Department on Oct 8, 2025, shows that the entry threshold for the T20 group rose to RM12,680 and above in 2024, up from RM11,820 in 2022. Meanwhile, the entry threshold for the elite top one per cent (T1) group has exceeded RM40,195, a bracket that includes households earning monthly incomes of RM100,000 and above.
