Taxation: Take Advantage of Incentives Provided
Tax planning is one of the crucial components of financial planning because it has a significant impact on your annual income.
If tax planning is not done correctly, you may pay more than you should throughout your working life.
This is very disadvantageous because the money can be used for other purposes such as investing, buying assets, or paying debts that are more beneficial to you.
The main goal of tax planning is to minimize the amount of tax payable so that it gives you more cash flow.
Most of us will likely pay more tax than we should due to failure to fully utilize the government's tax incentives, deductions, and rebates.
In addition, some refuse to return the Income Tax Return Form (ITRF) because they do not want to pay taxes or feel that the tax deduction through the Monthly Tax Deduction (MTD) is enough.
This is an unwise move because not returning the ITRF form is a legal offense and can be prosecuted and penalized by the Inland Revenue Board (IRB).
Secondly, not returning the form means you miss the opportunity to claim various incentives provided by the government through exemptions, deductions, and rebates when making income tax calculations.
Making a claim for the incentives provided in the current year is crucial because it can reduce the amount of taxable income, and simultaneously, the amount of tax you must pay.
Through the Self Assessment System (STS) method, you make monthly tax deductions through the MTD scheme as an eligible taxpayer.
MTD is treated as an installment payment for tax, and the annual amount already paid will then be compared with the actual tax when submitting the tax form.
Considering the number of exemptions, tax deductions, and rebates that may reduce the amount of taxable income and the amount of tax payable, the amount you have already paid through MTD is sometimes higher than the actual tax.
As exemptions, deductions, and rebates are not given automatically, you must fill in a BE form to claim them.
If it is not claimed in the current year, it will not be given to the taxpayer and cannot be claimed in future years.
Proofs of claims (such as purchase/payment receipts, doctor's declaration letters, etc.) must be kept for 7 years for audit purposes because the IRB can do so at any time.
Another thing you need to know is that your MTD deduction amount increases every year in line with salary increases.
Failure to make an assessment and return the ITRF form will result in you paying a high annual MTD amount.
Therefore, when enjoying a salary increase, and if you can afford it, you can focus on the type of relief you deserve and benefit you and your family, such as the purchase of publishing materials and sports equipment and doing health checks to reduce the amount of taxable income and pay zakat because you can get a rebate.
As a taxpayer, you incur a loss if you pay excess tax because it involves unnecessary cash withdrawals, which should be used for other things, such as investments or to reduce debt.
This can be avoided if you take proactive steps by resubmitting the ITRF form to the IRB so that your income can be assessed and you can claim eligible exemptions.
Therefore, focus on correctly filling out your ITRF form and making appropriate claims for more effective financial planning.
Make sure that the expenses you make throughout the year are also focused on things that qualify you to make straightforward claims, such as purchasing books, sports equipment, health checks, and various other reliefs that benefit you.
However, you need to be honest in making a claim and not make a false claim because it can cause you to be penalized and jailed.
Also, ensure you keep up to date with the latest developments regarding the types of exemptions, exemptions, and rebates given every time The Budget is presented in October. This will help you make more effective tax planning.
Nowadays, everything is online, so remember, fulfill your responsibilities as a Malaysian citizen by paying taxes and managing your finances wisely.
