THE government is considering adopting Net Disposable Income (NDI) as the basis for determining eligibility for welfare assistance, in a move aimed at ensuring aid reaches households based on their actual financial capacity rather than gross income alone.
In a written parliamentary reply dated July 13, the Economy Ministry said the existing B40, M40 and T20 household income classifications would continue to be used for socio-economic analysis, but acknowledged that a more accurate framework was needed to minimise the risk of vulnerable households being overlooked.
The ministry said the proposed NDI model offers a more comprehensive assessment of household finances by considering local living costs, expenditure patterns and regional demographic differences, rather than relying solely on gross monthly income.
According to the ministry, NDI is calculated through a two-stage process.
The first stage determines Disposable Income by deducting statutory commitments such as Employees Provident Fund (EPF) contributions, Social Security Organisation (SOCSO) contributions, income tax and zakat from a household's Gross Income.
The second stage deducts the essential expenditure required to maintain a reasonable standard of living. The remaining balance represents Net Disposable Income, reflecting the amount available for savings or discretionary spending.
The ministry said this approach provides a clearer picture of a household's actual financial resilience and spending capacity.
However, it stressed that replacing the existing national income classification framework would require extensive research, stronger data collection and careful policy design before implementation.
The government plans to assess the feasibility of introducing the NDI model under the Thirteenth Malaysia Plan (13MP), which covers the 2026 to 2030 period, and is currently working with relevant agencies to explore possible pilot projects.
The ministry was responding to a question from Datuk Seri Ismail Sabri Yaakob (BN-Bera), who asked whether the government intended to review existing income thresholds given that the current B40, M40 and T20 classifications may no longer accurately reflect present-day economic realities.
Malaysia currently categorises households into the B40, M40 and T20 income groups, with further segmentation into ten income deciles ranging from Decile 1 (D1) to Decile 10 (D10).
These official classifications are based on findings from the Household Income and Expenditure Survey (HIES), which is conducted twice every five years by the Department of Statistics Malaysia.
According to the latest HIES conducted in 2024 and published on Oct 8, 2025, the minimum monthly household income required to enter the T20 category increased to RM12,680, compared with RM11,820 in 2022.
The survey also showed that households in the top one per cent income bracket (T1) earned at least RM40,195 a month, a category that includes households with monthly incomes exceeding RM100,000.
The proposed shift towards an NDI-based assessment reflects the government's broader effort to improve the precision of targeted assistance by considering households' actual disposable resources after mandatory deductions and essential living expenses, rather than relying solely on gross income thresholds. - July 14, 2026
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