PERSONAL INCOME TAX: A GUIDE

The income tax season is in.

All processes such as filings and payments will begin March 1 and end on either April 30 or June 30.

Thus, everyone with the eligibility and responsibility to pay personal income taxes will have to do so.

Things have been made easier as individuals can now submit an online form of assessment through the designated e-Filing system to the Inland Revenue Board of Malaysia (IRB).

Individuals who have just started working, however, are first required to open a file with the IRB and sign up for an e-Register, provided he or she is within the income tax bracket.

A personal income tax is levied on individuals’ income, households, shares, and sole proprietorships.

Thus, there are several things that one needs to declare in their assessment form, namely taxable income, tax deductions and reliefs, as well as tax rebates.

Here are the basics that you need to know.

• Minimum Taxable Income

Since 2015, the government has enforced the registration of income tax for individuals with an annual income exceeding RM34,000 a year. This is after taking into account the deductions for Employees Provident Fund (EPF).   

The total income earned, including salary, dividends, royalties, rewards, gifts, rental income, and taxable income is then deducted from any tax exemptions, tax deductions, allowable tax relief, and anything else that is applicable.  

• Tax Deduction

Tax deduction rates can be up to 7% of one’s total income tax and are only allowed when conditions are met. This includes, but is not limited to, charities, gifts, and donations to government recognised bodies.

• Tax Excess Refund

A tax refund will be provided by the IRB if the amount of tax collected through the monthly tax deduction exceeds the amount of tax due. The refund will either be in the form of a special voucher or credited into the individual's account.

• Tax Exemption

Non-taxable income covers health and medical benefits, compensation, pensions, scholarships, travel allowances, and so forth. Tax exemption rates depend on stipulated conditions.

• Tax Rebate

Tax rebates are special circumstances in which tax amounts are reduced with direct deductions from the amount due. 

There are two categories where tax rebates are applicable: 

1. The husband/wife rebate of RM400 for those earning a taxable income of less than
    RM35,000. 

2. The payment of a tithe or zakat based on the amount withdrawn. 

• Tax Relief

Tax relief is an allowance deducted from one’s annual income to reduce taxation and encourage specific expenses, for example, the payment of one’s monthly Internet subscription. 

Serving primarily as a means to reduce financial burdens, the IRB had listed several expenses and amounts in its regularly maintained tax relief policy.

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