Smart Tax Planning

Tax is a compulsory payment to the government from your income and business profit to pay for the running of our nation and public services such as healthcare. Tax planning is an important part of your financial planning. Effective tax planning helps you to reduce your tax liability while conforming to your obligations under the Income Tax Act 1967.

If this is your first time filing for tax and your income in the previous year was RM34,000 or above, you will need to register online at hasil.gov.my with the tax authorities to receive your personal income tax number. You will then need to go to any tax branch to get your one-time pin, which is needed for first-time logins.

Key Deadlines To Be Aware Of:

• Resident individuals who do not carry on business (Form BE): 15 May 2022
  (inclusive 15 days grace period for e-filing)

• Resident individuals who carry on business (Form B): 15 July 2022
  (inclusive 15 days grace period for e-filing)

What Needs To Be Declared?

All forms of chargeable income including salary, fixed allowances, and benefits in kind need to be declared. Similarly, any other sources of income, including rental and business income, need to be declared as well. Certain tax exemptions will be applicable as an employee or business owner respectively. Income from financial institutions, Tabung Haji, and co-operatives are exempted on an individual level.

You can then proceed to claim all applicable tax relief for yourself, your spouse, your children, and your parents. Education tax relief is applicable for tertiary education level and also for your child – child care and contributions of up to RM8,000 to the national education savings scheme. You will also be eligible for tax relief for EPF, Private Retirement Schemes, social security, life insurance, and education/medical insurance. Various tax reliefs are also applicable for self, spouse, and child for medical expenses. Lastly, there is tax relief for domestic accommodation and lifestyle tax relief of up to RM5,500.

Smart Tax Tips

Here are a few quick tips to maximise your lifestyle tax relief. Did you know you can claim under both the lifestyle and special lifestyle tax relief if it applies to both categories? For example, if you bought a laptop for RM5,000 you can claim RM2,500 under lifestyle and RM2,500 under the special lifestyle tax relief. For internet broadband, you can also claim your mobile phone data bill if you are using a post-paid plan under your name. On the flip side, do make sure that you don’t accidentally submit sports attire such as sports shoes or clothes, as only sports equipment qualifies for tax relief!

Lastly, tax rebates will reduce your tax payable amount including for zakat contribution by Muslims. While tax deductions from gifts and donations to the government or a government-approved charity will help reduce your taxable income.

Do get organised when it comes to your income tax, including making sure you claim all applicable relief and keeping your receipts for at least 6 years. Don’t forget to recheck your filing to make sure it’s correct before hitting send.

Frequently Asked Questions

How do I verify the monthly tax deduction made by my employer is accurate and correct?

Use a monthly tax deduction table/schedule to verify the calculations. Or use this online calculator that can do it for you.

Can I claim my car insurance on my taxes?

Car insurance is not eligible for tax reduction. Only premiums paid for school or medical insurance, as well as life insurance, can be claimed.

What is the difference between Income Tax Exemption, Income Tax Relief and Income Tax Rebate?

Items that can be claimed from a specific source of income rather than gross total income are referred to as income tax exemptions.

Items that can be claimed under chargeable income are known as income tax relief. This is frequently used to describe a tax-cutting programme or incentive.

Items that can be claimed under tax payable are known as income tax rebates. In most cases, a claim for an income tax rebate is submitted on the amount of tax that is owed.

What will happen if I default on Tax Payments?

You will get a late payment penalty notice, and if you do not act on this notice, LHDN will send you a notice of tax arrears. LHDN will also send you reminders as well as a notice of pending court hearings. If LHDN is unable to get payment of taxes from you, a travel restriction may be imposed on you as well.

Want more tax tips or have questions? Speak to your Financial Health Coach on the Naluri App or watch Naluri's Smart Tax Planning webinar.