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Understanding Tax Reliefs 2020 in Malaysia

Updated 29 Mar 2021 – By Team Loanstreet


Do you know what’ll help when you’re about to pay your income tax? Knowing your tax relief definitely will, especially as it can bring you substantial savings in the long run. 

The next question is, do you know what type of tax reliefs that you can claim? Let’s talk about what’s been permitted by the Inland Revenue Board (Lembaga Hasil Dalam Negara - LHDN) in this article.

 

First, know how you can reduce your chargeable personal income tax (remember to keep the receipts for at least 7 years)

Individual and Dependent Relatives

 
Items The maximum tax relief amount
Individual and dependent relatives RM9,000
Basic supporting equipment for disabled self, spouse, child or parent RM6,000
Disabled individual RM6,000
Paying your education fees (Self) RM7,000
Childcare fees to a registered childcare centre/kindergarten (below 6 years) RM3,000
Spouse relief or alimony payment RM4,000
Disabled husband/wife RM3,500
Each unmarried child (below18 years old) RM2,000
Each unmarried child of 18 years old and above - study full-time ("A-Level", certificate, matriculation or preparatory courses) RM2,000
Each unmarried child of 18 years old and above:
- receive further education in respect of an award of a diploma or higher (excluding matriculation/preparatory courses), outside Malaysia in respect of an award of Degree or its equivalent (including Master or Doctorate) & the instruction and educational establishment shall be approved by the relevant government authority  
RM8,000
Disabled child RM6,000
Additional exemption of RM8,000 for a disabled child; above 18 years old, unmarried, pursuing a diploma or above in Malaysia RM8,000

 

Medical purposes

Items The maximum tax relief amount
Medical treatment, special needs and carer expenses for parents (Medical condition certified by a use/benefit medical practitioner)

OR

Parent (Restricted to RM1,500 for each)

 
RM5,000 

OR

RM 3000

Medical expenses for serious diseases for self, spouse or child RM6,000
Medical expenses for fertility treatment for self, spouse or child
Complete medical checkup for self, spouse or child (RM500)
Education and Medical Insurance (INCLUDING not through salary reduction) RM3,000

 

Other matters

Items The maximum tax relief amount
Lifestyle - Expenses for the use/benefit of self, spouse or child:
- purchase of books/journals/magazines/printed newspapers/other similar publications (Not banned reading materials)
- purchase of personal computer, smartphone or tablet (Not for business use)
- purchase of sports equipment for sports activity defined under the Sports Development Act 1997 and payment of gym membership
- payment of a monthly bill for internet subscription (Under own name)
RM2,500

Lifestyle – Purchase of personal computer, smartphone or tablet for self, spouse or child and not for business use

(Additional deduction for purchase made within the period of 1st June 2020 to 31st December 2020)

RM2,500
Purchase of breastfeeding equipment for own use for a child aged 2 years and below (Deduction allowed once in every 2 years of assessment) RM1,000
Net deposit in Skim Simpanan Pendidikan Nasional (Total deposit in 2020 MINUS total withdrawal in 2020)
  • RM8,000
Life insurance and EPF INCLUDING not through salary deduction
- Pensionable public servant category
*Life insurance premium
- OTHER than the pensionable public servant category
*Life insurance premium (Restricted to RM3,000)
*Contribution to EPF / approved scheme (Restricted to RM4,000)
RM7,000
Deferred Annuity and Private Retirement Scheme (PRS) - with effect from year assessment 2012 until year assessment 2021 RM3,000
Contribution to the Social Security Organisation (SOCSO) RM250

Payment for accommodation at premises registered with the Commissioner of Tourism and entrance fee to a tourist attraction

(Accommodation expenses at premises registered with the Ministry of Tourism, Arts and Culture Malaysia and entrance fees to tourists attractions incurred on or after 1st March 2020)

Registered accommodation premises can be checked here.
RM1,000



Besides that, there are other ways of slashing and reducing your 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. Discuss this and 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.

For example, if your spouse is earning less than RM34,000, perhaps it’s better to file it together. That way, you can claim tax relief up to RM4,000. But, let’s say, both of the spouses are earning more, best to do it separately. You can get RM9,000 tax reliefs till then!

 

2. Get cash reimbursement instead of remuneration

Fixed monthly allowances provided by your employer are taxable subject to your tax bracket. However, you can also receive the same amounts through reimbursements based on receipt, and this allows the amount received to be non-taxable. Be smart peeps!

 

3. Zakat and Fitrah

If you’re a Muslim paying for zakat, fitrah or any forms of Islamic obligation, your tax rebate will be the amount you paid. 

Since Muslims are already paying zakat, it’ll be burdensome if they’ve to pay for income tax as well. Do note that they need to pay if the income rebate isn’t sufficient to pay the income tax.

ALSO READ: How To Calculate Zakat On Your Investment?

 

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 an income tax rate of 10%, which is significantly lower as compared to a tax rate of 25% on normal share dividends.

  • Invest in overseas stocks with lower corporate income tax

The corporate income tax rate in some countries is lower (eg. 16.5% in Hong Kong compared to 24% 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.

 

 

The takeaway here is to always be alert to the latest tax reliefs

Without a doubt, utilising tax reliefs can immensely help in reducing how much you’ve to pay for income tax. Not to mention, it amounts to substantial savings which you can utilise for other investments and purchases. 

That’s why it’s so important to always know what’s the latest tax relief or perhaps if there’s anything new with it. At least, you’ll know how 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.

 

ALSO READ:

 

*The above article is intended for informational purposes only. Loanstreet accepts no responsibility for loss that may arise from reliance on information contained in the articles.

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