Simple Guide to Manage Your Tax
Income tax is imposed on individuals whose annual employment income exceeds a certain amount set by the government.
In Malaysia, if you are an individual with an annual employment income of more than RM34,000 (after EPF deduction) and have a Monthly Tax Deduction (MTD), you are eligible to be taxed. As such, you are advised to register your income tax file with Inland Revenue Board of Malaysia (IRB) immediately.
Eligible taxpayers only need to pay tax on income earned from Malaysia only. The type of income that is taxed is the income obtained from ;
a) Gains/profit from a business;
b) Gains/profit from employment;
c) Dividends, interest or discounts;
d) Rent, royalties or premiums;
e) Pensions, annuities, or other periodic payments; and
f) Gains/profit not falling under any of the foregoing paragraphs.
Malaysia practices a self-assessment system where taxpayers must fill in their own taxation forms for assessment.
Therefore, the taxpayer is required by law to determine his taxable income, compute chargeable income tax, submit the income tax return form, and make tax payments for the year of assessment concerned.
To assess taxable income, taxpayers need to fill in the Income Tax Return Form (ITRF) and file it with the IRB manually or through e-filing.
As a Malaysian citizen, everyone has to pay tax when meeting the prescribed conditions. As such, it is essential to remember the date when we can start to do the e-filing, which usually starts from March 1 every year.
When you are doing your tax assessment, you need to pay attention to:
1) Tax Exemptions
There are certain types of income that are exempted from tax, as such, it will not be part of your taxable income, so it wouldn’t be part of the aggregate income figure.
An example of income exempt from tax is dividends from the approved unit trust, such as Amanah Saham Bumiputera (ASB) dividends and dividends from authorized cooperatives.
Therefore, when choosing an investment, you should prioritize the investments in which the income received is not taxed, such as ASB.
2) Tax relief
Tax reliefs will help us to reduce our chargeable income. The chargeable income affects the tax rate and will ultimately help reduce the amount of tax that we have to pay.
Example of tax relief is education fees, lifestyle expenses such as reading material and sports equipment, and life insurance.
3) Tax Deduction
A tax deduction helps to reduce the amount you need to pay tax, and technically, it reduces aggregate rather than chargeable income.
Among the expenses that qualify for tax deductions are donations and sports activities approved by the government.
4) Tax Rebates
Tax rebates reduce the amount of tax charged, and among the examples of tax rebates are zakat / fitrah and departure levy for Umrah.
Overall, by focusing on tax exemption, tax relief, tax deductions, and tax rebates, the taxpayer can plan on how to minimize the tax they need to pay and enjoy a positive cash flow if there are surplus from the MTD as a result of the assessment.
To help you to manage your taxes effectively, here are some tips that you can follow:
a) Husband and wife are encouraged to make separate claims to enable them to manage their tax based on their respective income and expenses;
b) Choose to invest in instruments with exempted dividends;
c) Maximize the relief given by focusing on spending on things eligible as you can enjoy using it, and at the same time, you can the relief; and
d)Give donations or gifts and pay zakat annually if you are a Muslim.
Sumber : https://www.hasil.gov.my/
