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The Definitive Guide To Personal Income Tax In Malaysia For 2016

Find out everything you need to know about filing your personal income tax in Malaysia by April 2016!

Chapter 4

Tax Reliefs For Year Of Assessment 2015 (Tax Filed In 2016)

What is a income tax relief? Tax reliefs are set by LHDN, where a taxpayer is able to deduct a certain amount for money expended in that assessment year, from the total annual income. These are for certain activities or behaviours that the government encourages or even necessities or burdens to lighten our financial loads.

For income tax Malaysia, Tax reliefs can help reduce your chargeable income, and thus your taxes. If planned properly, you can save a significant amount of taxes.

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Tax reliefs Malaysia

What can you claim for reliefs this year?
Image from spectrumtaxrelief.com

In our example, a taxpayer would have been taxed about 10% of his total chargeable income of RM84,300 if he had claimed no tax reliefs at all.

However, with the self & dependent tax relief of RM9,000, life insurance & EPF relief at RM6,000, and special tax relief of RM2,000, his total chargeable income is now RM67,300, hence, he would only be taxed 7% of his chargeable income.

Other than the above three common tax reliefs, there are many other reliefs tax payers in Malaysia can maximise. Refer to this list of the income tax relief 2016 Malaysia:

Individual Relief Types
Self and dependent
Special relief [THIS YEAR ONLY]
Eligibility: Earning RM8,000 per month or below (aggregate income of up to RM96,000 annually)
Insurance & other policies
Life insurance and EPF
Deferred annuity and Private Retirement Scheme (PRS)
Insurance premium for education or medical benefit
Applicable to certain taxpayers
Husband/Wife/Alimony payments
Medical expenses for parents
Education fees (Individual)
Medical expenses for serious diseases
Complete medical examination
Purchase of books, journals, magazines and publications
Purchase of personal computer (once in every 3 years)
Purchase of sport equipment for sport activities (i.e. racquets, balls, golf sets)
Disabled individual
Disabled wife/husband
Basic supporting equipment (for disabled self, spouse, child or parent)
Applicable to tax paying parents
Ordinary child relief
RM1,000/per child
Each unmarried child of 18 years and above who is receiving full-time education ("A-Level", certificate, matriculation or preparatory courses)
RM1,000/per child
Each unmarried child of 18 years and above that is:
(i) receiving further education in Malaysia for diploma or higher (excluding matriculation/preparatory courses)
(ii) receiving further education outside Malaysia for degree or its equivalent (including Master or Doctorate)
(iii) the instruction and educational establishment shall be approved by the relevant government authority
RM6,000/per child
Disabled child
RM6,000/per child
Additional exemption per unmarried disabled child age 18 years old and above, who is pursuing:
(i) diplomas or above qualification in Malaysia
(ii) bachelor degree or above outside Malaysia in programme and in Higher Education Institute that is accredited by related Government authorities
RM6,000/per child
Net saving in SSPN's scheme

There really are a lot of tax reliefs and if you plan your reliefs effectively every year, you could be saving thousands in taxes every year.

Quick tips
On top of just looking at tax reliefs, how you file can make a difference. For married taxpayers, you need to consider whether to file for joint or separate assessment to maximise on the tax reliefs such as spouse relief, and also which spouse to claim for child relief. Depending on the income differences between the spouses claiming joint or separate can have a big impact on your tax savings.

Income Tax Calculator
Want to calculate how much tax you could be saving with tax reliefs?

Use our income tax calculator to find out!

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