BUDGET 2010 will see a personal income tax cut of one percentage point and increase in tax relief.

This should bring cheer to the middle income group, who have often complained about not receiving much good news in past Budgets.

The reduction in personal income tax by one percentage point to 26% will ensure that the individual income tax remains competitive.

To improve the well-being of the rakyat, the Government will raise personal relief from RM8,000 (S$3,296) to RM9,000. This means that each taxpayer will enjoy an increase of RM1,000 in disposable income from the 2010 year of assessment.

The cut in personal tax rate is for people earning above RM100,000 per annum.

"Given the amount of stress that the Government has been facing due to the economic crisis, it is heartening to note that it has still allowed for a 1% reduction of the top marginal tax rate for individuals from 27% to 26%," said one tax expert.

The expert said the move to increase the personal relief would allow families with a household income of about RM24,000 a year to be free from income tax.

The biggest drop in personal income taxes, however, is for locals and foreigners who are working and staying in Iskandar Malaysia.

For those who apply and start work in Iskandar Malaysia before 2015, the Government has proposed the maximum tax rate of 15% compared with 26% for the rest of the country.

To be eligible for this tax treatment, they must be engaged in sectors such as green technology, biotechnology, education services, healthcare, creative industry, financial advisory and consultancy services as well as logistic services and tourism.

The innovative and radical tax incentive is seen as a boost to Iskandar Malaysia.

And to encourage people to start saving at a younger age, the Government has declared that the existing personal tax relief of RM6,000 for EPF contribution and life insurance premiums be increased to RM7,000 from January next year for people with annuity schemes.