Check how much income tax you’ll pay with the latest tax rates and compare it to what you have paid last year.
Income tax savings require planning and being proactive throughout the assessment year. Even with the lower income tax rates when you file for your income tax next year, it doesn’t hurt to put in a little more effort in planning your expenditure to maximise your tax savings.
You can get these savings by knowing what tax reliefs are available and make a point of planning your purchases.
There are 21 tax reliefs available for individual taxpayers to claim. You just need to be aware of these reliefs and make a point of keeping the receipts when you expend money in these areas. Some of the easiest tax reliefs to leverage on are:
Some of the reliefs that are not applicable anymore are:
With the announcement made in Budget 2014, Malaysians no longer need to submit tax returns and can use Monthly Tax Deduction (MTD) as the final tax, starting from tax assessment year 2014.
MTD is a mechanism in which employers deduct monthly tax payments from the employment income of their employees. Employers rely on an employee’s personal data submitted to their Human Resource (HR) department to compute monthly MTDs.
However, in order for the MTD amount to be accurate, and does not require you to file tax when April comes along, you will need to provide more information to your employers.
You will need to submit a Form TP1. It is in this form you should state other reliefs that you are entitled to, to facilitate the computation of MTD. Reliefs that can included in the form are:
With all the above information provided by the employees, the employer will then remit the correct MTD amount to the Inland Revenue Board (IRB) of Malaysia every month.
Individual taxpayers must meet the following criteria in order to avoid filing for tax again when tax season comes along:
However, if you opt to file for your tax, you still do so before the deadline every year.
If you are married, there are a few things you need to consider when deciding whether to file for joint or separate assessment with your spouse. Making the right decision will maximise your tax savings for you and loved one.
Choosing the appropriate filing status is a major tax decision for newlyweds. According to Section 45 of Malaysia’s Income Tax Act 1967, all married couples in Malaysia have the right to choose whether to file individual or joint taxes.
As a general rule of thumb, if both spouses are earning high incomes in the year of assessment, it is always recommended to opt for separate assessment to leverage on the tax reliefs and deductibles available.
For couples with child(ren), they can maximise their tax savings through the child relief, if the spouse with the higher income claim for child relief.
Here are the differences between separate and join assessment:
The best way to find out if you should file jointly or separately with your spouse is to prepare the tax return both ways. Double check your calculations and then look at the net refund or balance due from each method.
If you use e-filing to file for your tax returns, you will be able to see the tax due for each individual and compare it with the joint assessment. This way, you will be able to see which filing status gives you the biggest tax savings.
With our income tax calculator, you can roughly estimate how much tax savings you will be able to make when you file for your tax in 2016. There’s still time for you to carefully plan your purchases to maximise your tax reliefs!
If you need more help with income tax in Malaysia, here are some relevant articles that will clear the air for you!