"CAN Malaysians actually pay less tax without breaking the law?
According to the experts, an individual taxpayer can consider the following measures to reduce the tax impact:
Maximise claims of personal reliefs, allowable deductions and rebates
This is by far the easiest way for Malaysians to minimise their tax liabilities under the current economic climate. It is wise for all taxpayers to familiarise themselves with the key reliefs/deductions that would help to minimise their tax liabilities for the year ahead.
This includes keeping a checklist on the various reliefs, deductions and rebates available to all individual taxpayers and practising the shoe-box mentality religiously, that is, by keeping a record of all receipts and documentary evidence to support the reliefs/deductions or rebates claimed during the year.
Some common reliefs that are often missed out are insurance premiums for education or medical benefits (RM3,000), purchase of sports equipment (RM300), and the relief on purchase of computers every three years (RM3,000).
According to the experts, an individual taxpayer can consider the following measures to reduce the tax impact:
Maximise claims of personal reliefs, allowable deductions and rebates
This is by far the easiest way for Malaysians to minimise their tax liabilities under the current economic climate. It is wise for all taxpayers to familiarise themselves with the key reliefs/deductions that would help to minimise their tax liabilities for the year ahead.
This includes keeping a checklist on the various reliefs, deductions and rebates available to all individual taxpayers and practising the shoe-box mentality religiously, that is, by keeping a record of all receipts and documentary evidence to support the reliefs/deductions or rebates claimed during the year.
Some common reliefs that are often missed out are insurance premiums for education or medical benefits (RM3,000), purchase of sports equipment (RM300), and the relief on purchase of computers every three years (RM3,000).
Separate assessment over combined assessment
It is necessary for spouses to decide whether to be assessed separately or elect for a combined assessment.
Where a joint assessment is elected, the total income of the wife is aggregated with the total income of the husband and the wife shall be treated as having no chargeable income for the particular year of assessment.
The combined total income will be assessed on the husband and the tax liability would be determined based on the applicable graduated tax rates and personal reliefs claimed by the husband.
Under a separate assessment, husband and wife will be treated as separate taxpayers who are then able to utilise the graduated tax rates individually and maximise their claims for personal reliefs and allowable deductions on an individual basis.
The rule of thumb is: If the spouse’s income is less than RM3,000 for the tax year, then it is worth considering a combined assessment.
It is necessary for spouses to decide whether to be assessed separately or elect for a combined assessment.
Where a joint assessment is elected, the total income of the wife is aggregated with the total income of the husband and the wife shall be treated as having no chargeable income for the particular year of assessment.
The combined total income will be assessed on the husband and the tax liability would be determined based on the applicable graduated tax rates and personal reliefs claimed by the husband.
Under a separate assessment, husband and wife will be treated as separate taxpayers who are then able to utilise the graduated tax rates individually and maximise their claims for personal reliefs and allowable deductions on an individual basis.
The rule of thumb is: If the spouse’s income is less than RM3,000 for the tax year, then it is worth considering a combined assessment.
Make charitable donations to approved institutions
Making charitable donations is not only good for the community but also good for one’s tax return as taxpayers can claim a deduction for donations made to approved institutions for up to 7% of their aggregate income in the relevant year.
Meanwhile, Muslim taxpayers would be able to reduce their tax liability by contributing to zakat which is rebated against the tax payable.
Making charitable donations is not only good for the community but also good for one’s tax return as taxpayers can claim a deduction for donations made to approved institutions for up to 7% of their aggregate income in the relevant year.
Meanwhile, Muslim taxpayers would be able to reduce their tax liability by contributing to zakat which is rebated against the tax payable.
Maximise allowable deductible expenses on rented properties
Taxpayers can also maximise their tax savings on rented properties by claiming allowable deductible expenses against income received from these rented properties.
These allowable deductible expenses include, among others, repairs and maintenance costs incurred on the property, quit rent and assessment paid and loan interest paid (corresponding to the rental period) on the mortgage taken out on the property.
Taxpayers can also maximise their tax savings on rented properties by claiming allowable deductible expenses against income received from these rented properties.
These allowable deductible expenses include, among others, repairs and maintenance costs incurred on the property, quit rent and assessment paid and loan interest paid (corresponding to the rental period) on the mortgage taken out on the property.
Invest in government saving bonds or securities
Investments in government saving bonds or government-backed securities typically yield a higher annual return rate compared with interest income derived from savings or fixed deposits. Additionally, income received by the taxpayers from such investments is generally tax exempt.
Consider splitting your passive income to your loved ones
If you are deriving rental income and you are at a higher marginal tax rate than your spouse, you may wish to consider transferring the property as a gift to your spouse or your child above the age of 21 to achieve a lower tax on the rental income (see boxed example).
Investing in the EPF Annuities Scheme
The EPF Annuities scheme will give an additional RM1,000 tax relief to taxpayers in addition to the maximum RM5,000 relief for EPF deductions. The scheme allows contributors to put part of their EPF deductions in it. This will be returned as a form of pension and cannot be withdrawn upon retirement.
The EPF Annuities scheme will give an additional RM1,000 tax relief to taxpayers in addition to the maximum RM5,000 relief for EPF deductions. The scheme allows contributors to put part of their EPF deductions in it. This will be returned as a form of pension and cannot be withdrawn upon retirement.
Investing in the National Education Savings Scheme (SSPN)
Investing in SSPN also allows further relief of up to RM3,000. So if a parent were to invest in education insurance and the fund, that would mean total tax relief of RM6,000.
The SSPN account provides a number of benefits to depositors, including eligibility to apply for National Higher Education Corporation (PTPTN) loans with minimum savings of RM20 in their SSPN accounts, free insurance coverage of up to RM50,000 for depositors who have a minimum deposit of RM1,000, dividends and tax exemption on dividends."
Investing in SSPN also allows further relief of up to RM3,000. So if a parent were to invest in education insurance and the fund, that would mean total tax relief of RM6,000.
The SSPN account provides a number of benefits to depositors, including eligibility to apply for National Higher Education Corporation (PTPTN) loans with minimum savings of RM20 in their SSPN accounts, free insurance coverage of up to RM50,000 for depositors who have a minimum deposit of RM1,000, dividends and tax exemption on dividends."
No comments:
Post a Comment