A guide to personal income tax

Several things are to be declared in the assessment form, namely taxable income, tax deductions and reliefs, as well as tax rebates


THE income tax season is almost upon us. The filing and payment process begins on March 1 and ends on April 30 or June 30, depending on the types of income earned.

Those eligible to pay taxes must make it their responsibility to declare their income and pay tax annually.

Each qualified individual and business can now submit an online form of assessment through the e-filing system to the Inland Revenue Board of Malaysia (IRB).

For individuals who have just started working and find themselves now within the income tax bracket, they are required to open a file with the IRB and sign up for an e-register.

Several things are to be declared in the assessment form, namely taxable income, tax deductions and reliefs, as well as tax rebates.

There are two types of income taxes imposed by the government. The first is tax on personal income, which is levied on individual income, households, shares and sole proprietorships.

The second is corporate tax, imposed on the net profit earned by an incorporated company.

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 after taking into account Employees Provident Fund deductions.

The total income earned, including salary, dividends, royalties, rewards, gifts and rental income plus taxable income, is then deducted from tax exemption, allowable tax relief and tax deduction.

Tax Exemption
Tax exemptions indicate not all types of income are taxable. Non-taxable income counts health and medical benefits, compensation, pensions, scholarships and travel allowances, among its items.

Still, the rate of exemption depends on the conditions stipulated.

Tax Deduction
If eligible upon the conditions, gifts and donations given to government recognised bodies are allowed to be considered as tax deductions.

Tax deduction rates are up to 7% of one’s total income tax.

There is also the scheduled tax deduction, which is an income tax deduction method whereby deductions are made to the received salary on a monthly basis.

This is aimed at reducing the tax burden on a large amount.

Tax Relief
Tax relief is an allowance deducted from the annual income to reduce taxation and encourage specific expenses, such as the purchase of sports equipment for sports activity and payment of monthly bills for Internet subscriptions.

It also reduces financial burdens such as medical expenses or education fees.

There are several things and amounts set out in the IRB’s policy for tax relief, which the agency can either maintain or change.

Tax Rebate
Tax rebate refers to the special circumstances given to reduce the amount of tax, which is deducted directly from the amount of tax due.

There are two categories of tax rebates applicable, one being the husband/wife rebate of RM400 for those earning a taxable income of less than RM35,000.

The second is a tax rebate for payment of a tithe or zakat based on the amount withdrawn.

The zakat tax rebate also allows Muslims to be exempted from making double payments for the purification of property.

Tax Excess Refund
If the amount of tax collected through the monthly tax deduction exceeds the amount of tax due, the IRB will provide a tax refund.

This tax refund will be given either through the account provided when filling the assessment form or via a special voucher.