Reducing Your Chargeable Personal Income Tax
The tables below shows some of the individual income tax relief you are eligible for.
Individual and Dependent Relatives
Other ways of slashing tax payable
1. Compare tax payable between separate assessment and joint assessment
If your spouse is working and is also paying tax, you may want to compare your income tax payable under separate assessments or a joint assessment. You should choose the assessment that requires you to pay the least income tax (generally, separate assessments bring more tax savings). You can do so by using the e-filing calculators on LHDN’s website.
2. Get cash reimbursement instead of remuneration
Fixed monthly allowances provided by your employer are taxable subject to your tax bracket. However, you can receive the same amounts through reimbursements based on receipt, and this allows the amount received to be non-taxable.
3. Zakat and Fitrah
If you are a Muslim paying for zakat, fitrah or any forms of Islamic obligation, your tax rebate will be the amount you paid.
4. Go for tax-efficient investment (at your own risk)
- Real Estate Investment Trusts (REIT)
Diversify your investment portfolio by investing in REITs to enjoy income tax rate of 15%, which is significantly lower as compared to tax rate of 25% on normal share dividends (For year 2016, corporate tax rate will be 24%. For more information, you can refer to Budget 2015).
- Invest in overseas stocks with lower corporate income tax
Corporate income tax rate in some countries are lower (eg. 16.5% in Hong Kong compared to 25% in Malaysia), which means you save on income taxes. Once the income from overseas stocks is taxed in the origin country, it will be free from tax charges when transferred to the owner in Malaysia.
Utilizing tax reliefs can amount to substantial savings which you can utilize for other investments and purchases. Keeping up to date on the latest tax reforms will also keep you in the know to tweak the necessary strings to maximise full returns. Keep yourself updated year on year to make sure you don’t get left behind. Happy filing.