Paying tax is something that we are required to do as citizens of a country. One of the aspects that people are confused about is tax relief and tax deduction in Malaysia.

If you are one of them, do not worry! We will explain all that in this article.

Read on and share this article to find out more.

What Is Tax Deduction or Tax Relief?

Tax deduction in Malaysia is a deduction of a person’s income that lowers their liability as their taxable income is lowered. 

Deductions are usually in the form of tax incentives, exemptions and credits.

These deductions are usually the person’s expenses which can be applied against or subtracted from their gross income. This can help to calculate how much tax they have to pay.

This is similar to tax relief where it reduces a person’s chargeable income. 

Tax deduction in Malaysia can also be a result of gifts and donations to a Government approved charitable organisation or directly to the Government. 

However, you must keep the receipt as proof.

You can see the contributions that you can make here in this tax deduction list:

  • Gift of money to the Government, State Government or Local Authorities.
  • Gift of money to Approved Institutions or Organisations (Amount is limited to 7% of aggregate income)
  • Gift of money or cost of contribution in kind for any Approved Sports Activity or Sports Body (Amount is limited to 7% of aggregate income)
  • Gift of money or cost of contribution in kind for any Approved Project of National Interest Approved by Ministry of Finance (Amount is limited to 7% of aggregate income)
  • Gift of artefacts, manuscripts or paintings.
  • Gift of money for provision of Library Facilities or to Libraries.
  • Gift of money or contribution in kind for the provision of facilities in Public Places for the benefit of disabled persons.

If we look at the tax deduction in 2019 here in Malaysia, a person was allowed to deduct 7% of their aggregate income that helps reduce their chargeable income.

Who Is Eligible For Tax?

In Malaysia, everyone who stays here for more than 182 days are considered as residents and have to pay tax according to the Malaysian tax law. 

If a person stays in Malaysia for less than that, they are taxed differently.

There is also a group who do not have to pay tax. These are the categories of people that this tax exemption applies to:

  • Those who are employed in Malaysia for less than 60 days in a year
  • Those who are aged over 55 years and receive Malaysian pension
  • Those who are receiving interest from banks.

Those who stay in Malaysia under the “Malaysia My Second Home Programme” also do not have to pay tax on the income that they received abroad.

However, the income that they achieve in Malaysia is reliable through tax.

The income tax of residents is classified into 8 different tax groups that range from 0% to 26%. 

For non-residents, their income is calculated into 3 groups which are 27%, 15% and 10%. Their group is based on their type of income.

Steps To Apply For Tax Relief

Here are the steps that you need to follow to apply for tax relief. This is based on last year’s process. These steps all require you to sign up and have an eFiling account.

Visit this website to see more on E-Filling. 

Once you have an account, you can log in at Ez-Hasil and choose the form that applies to you in e-Borang.

After that, fill in and review your information page to make sure the information is correct.

If you want the excess tax to be transferred to your bank account, fill in your bank details. Otherwise, it will be given in the form of vouchers.

Next, you will have to fill in details regarding your income. This includes dividends, interest, rent and also pension.

You will also be required to declare the amount of gifts and donations that you have given to LHDN approved organisation.

This will allow you to qualify for a tax deduction in Malaysia. Check the “Potongan Cukai Berjadual “section to make sure the details are correct.

You will then have to fill in information regarding 2019’s tax relief, tax exemptions and tax rebates. 

Before clicking send, make sure you check that every detail you fill in is correct and have receipts and evidence as proof.

Check the amount of tax you have to pay before sending.

tax deduction malaysia

Image credit: iMoney.my

 

List of Income Tax Relief 2019

Here is the list of income tax relief in Malaysia that you claim if you are eligible. This is based on the list given by LHDN.

No.

Individual Relief Types

Amount (RM)

1

Individual and dependent relatives

9,000

2

Medical treatment, special needs and carer expenses for parents (Medical condition certified by a medical practitioner)

OR

Parent
Restricted to 1,500 for only one mother
Restricted to 1,500 for only one father

5,000 (Restricted)

OR

3000 (Restricted)

3

Basic supporting equipment for disabled self, spouse, child or parent

6,000 (Restricted)

4

Disabled individual

6,000

5

Education fees (Self)

  1. Other than a degree at masters or doctorate level – Course of study in law, accounting, Islamic financing, technical, vocational, industrial, scientific or technology
  2. Degree at masters or doctorate level – Any course of study

7,000 (Restricted)

6

Medical expenses for serious diseases for self, spouse or child

6,000 (Restricted)

7

Complete medical examination for self, spouse, child (Restricted to 500)

8

Lifestyle – Expenses for the use/benefit of self, spouse or child in respect of:

  1. purchase of books/journals/magazines / printed newspapers / other similar publications (Not banned reading materials)
  2. purchase of personal computer, smartphone or tablet (Not for business use)
  3. purchase of sports equipment for sports activity defined under the Sports Development Act 1997 and payment of gym membership
  4. payment of monthly bill for internet subscription (Under own name)

2,500 (Restricted)

9

Purchase of breastfeeding equipment for own use for a child aged 2 years and below (Deduction allowed once in every 2 years of assessment)

1,000 (Restricted)

10

Childcare fees to a registered child care centre/kindergarten for a child aged 6 years and below 

1000 (Restricted)

11

Net deposit in Skim Simpanan Pendidikan Nasional (Total deposit in 2019 MINUS total withdrawal in 2019)

8,000 (Restricted)

12

Husband/wife/payment of alimony to former wife

4,000 (Restricted)

13

Disabled husband/wife

3,500

14

Each unmarried child and under the age of 18 years old

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:

  1. receiving further education in Malaysia in respect of an award of a diploma or higher (excluding matriculation/ preparatory courses).
  2. receiving further education outside Malaysia in respect of an award of a degree or its equivalent (including Master or Doctorate).
  3. the instruction and educational establishment shall be approved by the relevant government authority.


8,000

17

Disabled child

6,000

Additional exemption of RM8,000 disable child age 18 years old and above, not married and pursuing diplomas or above qualification in Malaysia @ bachelor degree or above outside Malaysia in a program and in Higher Education Institute that is accredited by related Government authorities 

8,000

18

Life insurance and EPF INCLUDING not through salary deduction

  1. Pensionable public servant category
  • Life insurance premium
  1. OTHER than pensionable public servant category
  • Life insurance premium (Restricted to RM3,000)
  • Contribution to EPF / approved scheme (Restricted to RM4,000)

7,000 (Restricted)

19

Deferred Annuity and Private Retirement Scheme (PRS) – with effect from year assessment 2012 until year assessment 2021

3,000 (Restricted)

20

Education and medical insurance (INCLUDING not through salary deduction)

3,000 (Restricted)

21

Contribution to the Social Security Organization (SOCSO)

250 (Restricted)

tax deduction malaysia

In conclusion, it is important to gain information regarding tax especially on tax deduction in Malaysia. This will help you go through this process with ease.

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