{"id":60534,"date":"2023-12-28T16:38:54","date_gmt":"2023-12-28T08:38:54","guid":{"rendered":"https:\/\/www.imoney.my\/articles\/?p=60534"},"modified":"2024-02-28T14:08:35","modified_gmt":"2024-02-28T06:08:35","slug":"tax-relief-explanation","status":"publish","type":"post","link":"https:\/\/www.imoney.my\/articles\/tax-relief-explanation","title":{"rendered":"This Is How Income Tax Relief Helps You"},"content":{"rendered":"

Filing your taxes is something that no one looks forward to, but ends up doing every year (even if you don\u2019t earn enough to pay anything). Although the whole process might seem tedious and dull, it\u2019s still something that we have to do, for the betterment of our country.<\/span><\/p>\n

Truth be told, although it can be said that the whole process of filing your taxes can be confusing, there is one aspect of tax filing that most people spend the most time ruminating; tax relief.<\/span><\/p>\n

Which is why in this article, we\u2019re going to explore just what tax relief is, what can be applied for tax relief, and ultimately, how it really affects you.<\/span><\/p>\n

<\/span>What is tax relief?<\/b><\/span><\/h2>\n

The answer is pretty simple, tax reliefs are purchases or spending that you can use to reduce the amount of tax you pay to the government.<\/span><\/p>\n

Usually, categories of tax reliefs are set by the government to encourage specific spending habits or behaviour. For example, the lifestyle tax relief set by the government is there to incentivise Malaysians to buy books, sporting equipment, or a personal computer for personal growth.<\/span><\/p>\n

<\/span>How does tax relief work?<\/b><\/span><\/h2>\n

A common misconception on how tax relief works is that people think that the amount they spent on any of the tax relief categories will be refunded to them, or deducted from the amount of tax they pay.<\/span><\/p>\n

This leads to people trying to maximise their so-called tax reliefs, by spending more on the categories allowed for tax relief.<\/span><\/p>\n

However, this could not be further from the truth. Instead, tax relief reduces your taxable income based on the amounts that you spend in each category (up to the limits set by the government).<\/span><\/p>\n

How do you calculate your taxable income? Here\u2019s the formula<\/span><\/p>\n

Taxable income – tax exemption – tax reliefs = Chargeable income.<\/span><\/p>\n

<\/div><\/div> Not all income is taxable. Learn more about it here<\/span>: <\/b>How To Calculate Your Chargeable (Or Taxable) Income<\/b><\/a>
<\/div><\/div><\/p>\n

Malaysian personal income tax is divided into several brackets based on how much chargeable income you have. The more chargeable income you have, the higher on the bracket you go.<\/span><\/p>\n

\n\n\n\n\t\n\t\n\t\n\t\n\t\n\t\n\t\n\t\n\t\n\t\n\t\n\t\n\t
Category<\/td>Chargeable income<\/td>Calculations (RM)<\/td>Rate %<\/td>Tax (RM)<\/td>\n<\/tr>\n
A<\/td>0 - 5,000<\/td>On the First 5,000<\/td>0<\/td>0<\/td>\n<\/tr>\n
B<\/td>5,001 - 20,000<\/td>On the first 5000
\nNext 15000<\/td>		1<\/td>0
\n150<\/td>\n<\/tr>\n
C<\/td>20,001 - 35,000<\/td>On the first 20,000
\nNext 15,000<\/td>		3<\/td>150
\n450<\/td>\n<\/tr>\n
D<\/td>35,001 - 50,000<\/td>On the first 35,000
\nNext 15,000<\/td>		8<\/td>600
\n1,200<\/td>\n<\/tr>\n
E<\/td>50,001 - 70,000<\/td>On the first 50,000
\nNext 70,000<\/td>		13<\/td>1,800
\n2,600<\/td>\n<\/tr>\n
F<\/td>70,001 - 100,000<\/td>On the first 70,000
\nNext 30,000<\/td>		21<\/td>4,400
\n6,300<\/td>\n<\/tr>\n
G<\/td>100,001 - 250,000<\/td>On the first 100,000
\nNext 150,000<\/td>		24<\/td>10,700
\n36,000<\/td>\n<\/tr>\n
H<\/td>250,000 - 400,000<\/td>On the first 250,000
\nNext 150,000<\/td>		24.5<\/td>46,700
\n36,750<\/td>\n<\/tr>\n
I<\/td>400,001 - 600,000<\/td>On the first 400,000
\nNext 200,000<\/td>		25<\/td>83,450
\n50,000<\/td>\n<\/tr>\n
J<\/td>600,001 - 1,000,000<\/td>On the first 600,000
\nNext 400,000<\/td>		26<\/td>133,450
\n104,000<\/td>\n<\/tr>\n
K<\/td>1,000,001 - 2,000,000<\/td>On the first 1,000,000
\nNext 1,00,000<\/td>		28<\/td>237,450
\n280,000<\/td>\n<\/tr>\n
L<\/td>Exceeding 2,000,000<\/td>On the first 2,000,000
\nNext Ringgit<\/td>		30<\/td>517,450
\n.....<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/span><\/p>\n

<\/span>So how does tax relief affect you?<\/b><\/span><\/h2>\n

In the section above, we have discussed how tax relief deducts from your total income, which will make your chargeable income lower.<\/span><\/p>\n

Here\u2019s an example to help you visualise it;<\/span><\/p>\n

<\/div><\/div> Example A :<\/span><\/p>\n

Rahman has a total income of RM45,000. In the year of assessment 2023, Rahman also bought a laptop which cost RM2,500.<\/span><\/p>\n

So what is Rahman\u2019s taxable income? Let\u2019s calculate<\/span><\/p>\n

RM45,000 – RM9000 (individual tax relief) – RM2500 (lifestyle tax relief) = RM33500<\/span><\/p>\n

So from the calculations, we now know that Rahman\u2019s taxable income is RM33,500.<\/span><\/p>\n

Which places him in category C of the tax bracket.<\/span><\/p>\n

This means that for the current year of assessment, Rahman will be paying RM595 in taxes.

<\/div><\/div><\/span><\/p>\n

But what if Rahman didn\u2019t claim his tax relief from buying the laptop? Let\u2019s have a look;<\/span><\/p>\n

<\/div><\/div> Example B :\u00a0<\/span><\/p>\n

Rahman has a total income of RM45,000. His only applicable tax relief is the automatically applied individual tax relief of RM9,000 and nothing else.<\/span><\/p>\n

RM45,000 – RM9000 = RM36000<\/span><\/p>\n

With a taxable income of RM36,000, Rahman is now placed in category D of the tax bracket.<\/span><\/p>\n

So how much taxes will Rahman have to pay now? RM608.

<\/div><\/div><\/span><\/p>\n

From these two examples, we can see that maximising your tax relief can make a difference in the total amount of tax you have to pay in the end, <\/span>but only if it takes you down to a lower tax bracket.<\/b><\/p>\n

<\/span>Should you maximise your tax relief?<\/b><\/span><\/h2>\n

Technically, yes. Every bit that goes into tax relief reduces your chargeable income, which means that ultimately you are paying less in taxes overall. It\u2019s an extra bonus if you manage to claim enough relief to find yourself in a lower bracket.<\/span><\/p>\n

However, this only applies to things that you would normally spend on; like medical checkups or child care expenses. It doesn\u2019t quite make sense to go on a shopping spree in an attempt to claim more in tax relief.<\/span><\/p>\n

If we take Rahman\u2019s example from above, yes the purchase of the laptop took him down to a lower tax bracket, but the difference in tax that he has to pay is only RM13.<\/span><\/p>\n

Which means that Rahman spent RM2500, only to save RM13 in taxes.<\/span><\/p>\n

So our advice for you will be, if there\u2019s any necessary purchase that you can make that you can claim tax relief on, then go ahead and file it in.<\/span><\/p>\n

But if it\u2019s not a necessary purchase, and you\u2019re just buying it to maximise your tax relief, you might be losing more money than you\u2019re saving in the long run.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

Filing your taxes is not really something that anyone looks forward to, but it\u2019s something that we have to do.<\/p>\n","protected":false},"author":51,"featured_media":60535,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[254,215],"tags":[303,1268,751,947],"class_list":["post-60534","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-income","category-tax","tag-income-tax","tag-personal-income-tax","tag-tax","tag-taxes"],"acf":[],"yoast_head":"\nIs Filing Your Tax Reliefs Really Necessary? How Does It Really Affect You?<\/title>\n<meta name=\"description\" content=\"Filing your income tax and not sure just how tax reliefs affect you? 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