Ever heard of personal income tax but unsure what it means? You're not alone! Tax can seem complex, but we're here to break it down into bite-sized pieces, making it clear and easy to understand.
What Is Personal Income Tax?
Think of personal income tax as a contribution you make to the government based on the money you earn throughout the year. This includes your salary, wages, dividends, interest income, and more. Whether you're a resident or non-resident of Malaysia, the Inland Revenue Board of Malaysia (LHDNM) determines your tax obligation.
If you are an individual identified as a tax resident, you need to understand that income tax in Malaysia is a progressive tax system. This means the more you earn, the higher your tax rate becomes.
Individuals that are subjected to paying personal income tax, have the option to claim for tax relief, tax deductions and tax rebates. In this article, we will be delving deeper into tax reliefs.
What Are Tax Reliefs?
While paying taxes is important, you're not alone in wanting to minimize your tax obligation. This is where tax reliefs come in. Think of them as deductions you can claim on your chargeable income, ultimately lowering your tax bill. LHDNM allows you to claim these reliefs for various eligible expenses, reducing your overall tax burden.
Note: Keep all records of your eligible expenses for tax reliefs for up to 7 years. This ensures you have proper documentation in case of any inquiries. (Section 82A of the Income Tax Act 1967).
Individual Relief Types in Malaysia (YA 2023)
Thinking about claiming tax reliefs but unsure where to start? We've got you covered! This guide breaks down the different types of individual tax reliefs available in Malaysia for the assessment year 2023 (YA 2023).
1. General Reliefs
This category covers basic expenses incurred by you and your dependents. You can claim up to RM 9,000, with an additional RM 6,000 relief available for individuals with disabilities registered with the Social Welfare Department (JKM).
2. Education Reliefs (up to RM7,000)
Financing your own higher education? This relief is for you! However, it applies to specific courses:
Undergraduate: Law, accounting, Islamic financing, technical, vocational, industrial, scientific, or technology.
Postgraduate (masters or doctorate): Any course of study.
Upskilling courses recognized by the Department of Skills Development qualify for a relief of up to RM 2,000 only.
3. Medical Reliefs
This category covers various medical expenses for:
Yourself, spouse, or child (up to RM10,000):
Serious diseases.
Fertility treatment.
Vaccinations (restricted to RM1,000).
Other medical expenses (complete medical examinations, COVID-19 tests, mental health consultations) (restricted to RM1,000).
Expenses for children under 18 (assessment of intellectual disability, early intervention programs) (restricted to RM4,000).
Your parents (up to RM8,000):
Medical treatment, special needs, and carer expenses (medical condition must be certified by a medical practitioner).
4. Lifestyle Reliefs
Treat yourself while saving on taxes! These reliefs cover purchases for yourself, spouse, or child (up to RM2,500):
Purchase or subscription of books, journals, magazines, newspapers, or other similar publications
Purchase of personal computer, smartphone, or tablet (not for business use)
Purchase of sports equipment for sports activity and payment of gym membership
Payment of monthly bill for internet subscription (under own name)
Additional Sports Relief (up to RM500):
Purchase of sports equipment for any sports activity as defined under the Sport Development Act 1997 (excluding motorized two-wheel bicycles)
Payment of rental or entrance fees to sports facilities
Payment of registration fees for sports competitions where the organizer is approved and licensed by the Commissioner of Sports under the Sport Development Act 1997
Breastfeeding equipment (up to RM1,000) *
* This can only be claim once every two years and it is only available to mothers with a child aged two years and below.
5. Childcare Reliefs (up to RM3,000)
Reduce childcare expenses for your child aged 6 years old or younger, attending a registered facility.
6. Savings Reliefs (up to RM 8,000)
Claim a relief for the net deposit (2023 deposit minus total withdrawal) in Skim Simpanan Pendidikan Nasional (SSPN).
8. Dependent Reliefs
Disabled husband/wife (RM5,000)
Each unmarried child under 18 years old (RM2,000)
Each unmarried child 18+ in full-time education (up to diploma) (RM2,000)
Each unmarried child 18+ in further education (diploma or higher) (RM8,000, Approved program and institution)
Disabled child (RM6,000, Additional exemption of RM8,000 for specific situations)
9. Insurance & Pension Reliefs (up to RM 13,000)
This category has a combined limit of RM13,000, with specific allocations for different contributions:
Mandatory contributions to approved schemes or voluntary contributions to EPF (excluding private retirement schemes) or contributions under any written law (restricted to RM 4,000)
Life insurance premium payments or family takaful contributions or additional voluntary contributions to EPF (restricted to RM 3,000)
Deferred Annuity and Private Retirement Scheme (PRS) (restricted to RM3,000)
Education and medical insurance (restricted to RM3,000)
10. Other Reliefs
Contribution to Social Security Organization (SOCSO) (up to RM350)
Electric vehicle charging facilities (up to RM2,500, Not for business use)
Alimony payments (up to RM4,000)
Purchase of basic supporting equipment for yourself or disabled family members (up to RM6,000)
Below shows an example calculation of how tax reliefs help reduce chargeable income:
*Therefore, tax you have to pay is RM 1,500 according to the rate of tax (progressive tax system table)
Note: Please be advised that this article provides a summary of information sourced from the provided website and may not cover all details. For the most up-to-date information, it is advisable to refer to the official LHDNM website.
FAQs
1. How do I know if I am considered tax resident in Malaysia?
You are considered a tax resident in Malaysia if you meet any of these criteria:
Stayed in Malaysia for at least 182 days in a calendar year.
Stayed in Malaysia for less than 182 days but linked to a period of 182 or more consecutive days in the preceding or following year.
Stayed in Malaysia for 90 days or more during the year, with a history of 90 days in at least 3 of the 4 preceding years.
Resident for the year following the immediate previous year and the three preceding years.
2. What is the minimum income to be taxable?
If your annual income from all sources exceeds RM34,000 (approximately RM2,833 per month net income after EPF deductions), you'll be required to pay income tax.
3. My salary has not reached the threshold of paying tax, do I still need to do my e-BE submission to declare my 2023 income?
Even if your income falls below the taxable threshold, we highly recommend declaring your income through the e-BE system. This helps maintain a positive record with the Inland Revenue Board of Malaysia (LHDNM) and build a great habit if your income becomes taxable in the future.
4. What is the due date for tax submission in Malaysia?
Malaysia's tax season usually kicks off on March 1st each year. Resident individuals have until April 30th (offline submission) or May 15th (e-Filing) to file their taxes. Remember, gathering relevant receipts for claiming tax reliefs beforehand is always a wise move.
5. Are there other ways to lower income tax in Malaysia?
In addition to personal tax reliefs, several other tax benefits can help you minimize your tax burden. These include tax deductions, rebates, and exemptions that can significantly reduce your overall tax liability. Read more about other Malaysian tax incentives here.
Understanding personal income tax can feel overwhelming, but hopefully this guide has helped break it down into manageable pieces. Remember, you're not alone in navigating the tax system! If you have any questions, our team at Synergy is always happy to help (📞+6 010-277 0718 or 📩 info@synergy-outsourcing.com).
