You know it’s tax season when the most of us start scrambling to file our taxes. It can get stressful if you’re unclear about certain aspects of filing your income tax returns or miss out on important exemptions. Finding out you owe more than you expected to the Inland Revenue Board of Malaysia (LHDN) can also be an unpleasant surprise.
However, it’s not that difficult to grasp the process of tax filing on your own. Once you’ve figured out the nitty gritty, this dreary task can be quite a breeze.
You have to be in one of the following income brackets to be taxed:
The tax rate starts at 0% and graduates to 28% on chargeable/taxable income that exceeds RM1 million each year. This is applicable only for residents of Malaysia.
If you’re a non-resident, you’ll be charged a flat rate of 28% on your chargeable income.
Below are the tax rates for residents of Malaysia.
|Chargeable Income||Income Tax Rate (%)||Gross Tax Payable (RM)|
|On RM5,000 Next RM5,000||0 1||0 50|
|On RM10,000 Next RM10,000||– 1||50 100|
|On RM20,000 Next RM15,000||– 3||150 450|
|On RM35,000 Next RM15,000||– 8||600 1,200|
|On RM50,000 Next RM20,000||– 14||1,800 2,800|
|On RM70,000 Next RM30,000||– 21||4,600 6,300|
|On RM100,000 Next RM50,000||– 24||10,900 12,000|
|On RM150,000 Next RM100,000||– 24||22,900 24,000|
|On RM250,000 Next RM150,000||– 24.5||46,900 36,750|
|On RM400,000 Next RM200,000||– 25||83,650 50,000|
|On RM600,000 Next RM400,000||– 26||133,650 104,000|
|On RM1,000,000 Exceeding RM1,000,000||– 28||237,650|
Now that you know what income bracket is applicable for income tax, let’s break it down even further.
Let’s assume you’re a full-time employee, drawing RM60,000 from your job. You also have several investments. Your fixed deposit earns you RM1,000 and you earn RM10,000 from rent. This totals up your annual income to RM71,500.
Here’s how you can calculate the tax on your annual income.
|Total Annual Income||RM71,000|
|Exemption: Interest earned from Fixed Deposit||RM1,000|
|Relief: Self and dependent||RM9,000|
|Relief: EPF and life insurance (up to 6,000)||RM6,000|
|Relief: Medical insurance||RM750|
|Total chargeable income||Total annual income – tax exemptions – tax reliefs (71,000 – (RM1,000) – (RM9,000 + RM6,000 + RM750) = RM54,250|
Your total taxable income will be RM54,250 each year.
With tax relief, the amount you owe on taxes is significantly reduced. Below are the tax reliefs in Malaysia, as of 2017:
|S.No||Individual Relief Types||Amount (RM)|
|1||Self and dependent||9,000|
|2||Medical expenses for parents or, Parent Limited 1,500 for only one mother Limited 1,500 for only one father||5,000 (Limited) OR 3000 (Limited)|
|3||Basic supporting equipment for disabled self, spouse, child, or parent||6,000 (Limited)|
|5||Education Fees (Self)
|6||Medical expenses for serious diseases for self, spouse or child||6,000 (Limited)|
|7||Complete medical examination for self, spouse, child||500 (Limited)|
|9||Purchase of breastfeeding equipment||1,000 (Limited)|
|10||Net saving in SSPN's scheme (total deposit in year 2017 MINUS total withdrawal in year 2017)||6,000 (Limited)|
|11||Child care fees to a Child Care Centre or a Kindergarten||1,000 (Limited)|
|12||Husband/Wife/Alimony Payments||4,000 (Limited)|
|14||Ordinary Child relief||2,000|
|15||Each unmarried child of 18 years and above who is receiving full-time education ("A-Level", certificate, matriculation or preparatory courses)||2,000|
|16||Each unmarried child of 18 years and above that:
|17||Disabled child (Additional exemption of RM8,000 disabled child age 18 years old and above, not married and pursuing diplomas or above qualification in Malaysia @ bachelor degree or above outside Malaysia in program and in Higher Education Institute that is accredited by related Government authorities)||6,000|
|18||Life insurance and EPF INCLUDING not through salary deduction||6,000 (Limited)|
|19||Deferred Annuity and Private Retirement Scheme (PRS) - with effect from year assessment 2012 until year assessment 2021||3,000 (Limited)|
|20||Insurance premium for education or medical benefit INCLUDING not through salary deduction||3,000 (Limited)|
|21||Contribution to the Social Security Organization (SOCSO)||250 (Limited)|
Budget 2019, which was released in November 2018, included new changes to tax reliefs:
Tax exemption is when you don’t have to pay tax for certain transactions or income categories. Below are the tax exemptions you should be aware of:
With tax rebates, a certain portion from total tax is taken out to make it even lower. If you’re a Muslim, you’ll receive Zakat/Fitrah.
The other form of tax rebates is called the spouse tax rebate. If you have a chargeable income of less than RM35,000 per annum, you will get a rebate of RM400.
Yes. If you’re a resident of Malaysia earning a certain amount each month or year, you’re required to pay taxes. More details on the income breakdown below:
If you fit in the bracket above, you have to register a tax file and pay your income tax.
There are more aspects you need to consider before you pay income tax.
Going on business trips, health treatments, or social visits that don’t exceed 14 days doesn’t exempt you from income tax. These reasons will be accounted for in your consecutive days.
If this is going to be your first time filing taxes, you will have to register yourself as a taxpayer. You will receive an income tax number, which informs the Government how much you’re earning.
To get this number, you will have to visit the nearest LHDN branch along with a copy of your MyKad and a recent payslip.
Alternatively, you can also complete the registration process online.
Now that you’re a registered taxpayer, you can start your e-filing process.
Q. How do I file my income tax if I have changed my job recently?
A. You need to make a note of the date you left the company and the tenure you have served at your previous company. You should also contact your former employer and request them to send you the EA form from the previous year.
Once you have received this form, you can proceed with the same e-filing process.
Q. How do I file my income tax if I’m working in a Malaysia company overseas?
A. The salary you earn from working overseas wouldn’t be taxable unless the income you have received is incidental to the Malaysian employment. This is according to the Section 13(2)(c) of the Act.
Although, you should inform the LHDN that you’re working overseas to avoid getting penalised for not filing your taxes.
Q. How do I make changes to my income tax return form?
A. You cannot make modifications to your income tax form if you have chosen e-filing, according to the LHDN. What you can do is submit your appeal for amendments on or before 20 April 2018. This will help you avoid any penalties being imposed.
Q. When can I expect my tax refund?
A. Once you have submitted your income tax return form, you can expect the refund to be credited to your account automatically within 30 days. This is when you have overpaid in taxes and are entitled to a refund.
Q. Are there any benefits of early tax form submission?
A. Yes. You will get faster tax refunds, avoid tax penalties, and you can prevent tax return identity theft.