Tax Reliefs, Rebates, and RPGT for Income Tax Filing in 2024 for YA 2023

Take a look at individual LHDN tax reliefs you can take advantage of for the year of assessment 2023 (YA 2023). Do take note that the deadline for this year’s income tax efiling for individuals who do not carry on business is 30 April 2024.

In this article

1. Should I declare my income even though I don’t have to pay tax?
2. How does LHDN calculate my income tax?
3. What are the YA 2023 tax reliefs?
4. What are tax rebates for YA 2023?
5. Real Property Tax Gains (RPGT) for property owners
6. Capital allowance for property and business owners
7. Do I have to pay tax for my rental income?
8. Do gig economy workers get any income tax relief?

Did you know that payments made by taxpayers in this country account for over 70% of our nation’s coffers? The monies go towards national security as well as for building infrastructures such as hospitals, schools and highways.

Individuals who have a net annual salary exceeding RM34,000 after EPF and SOCSO deductions are required to pay income tax each year. A net salary is different from a gross salary; the latter is the monthly salary received from your employer before deductions are made. Gross salary, on the other hand, includes your basic pay plus overtime pay and allowances, if any.

Employees who fulfil the criteria for Monthly Tax Deductions (Potongan Cukai Bulanan – PCB) are encouraged to first file an income tax return before receiving any PCB deduction. Taxpayers must apply for an income tax reference number at their local LHDN branch.

Did you know that despite having an annual salary below RM34,000, you are still required to register with LHDN? Furthermore, what criteria determine one’s status as a tax resident in Malaysia?

Should I declare my income even though I don’t have to pay tax?

You are considered a tax resident in Malaysia if you meet the following criteria as an individual:

• The individual is present in Malaysia for at least 182 days in a calendar year.
• The individual is present in Malaysia for less than 182 days during the year, but the period is linked to a physical presence of 182 or more consecutive days in the following or preceding year.
• Temporary absences from Malaysia due to business trips, treatment for ill-health, or social visits not exceeding 14 days are counted as part of the consecutive days, provided that the individual is in Malaysia before and after each temporary absence.
• The individual is in Malaysia for 90 days or more during the year and, in any 3 of the 4 immediately preceding years, they were for at least 90 days or
• Were resident in Malaysia.
• The individual is a resident for the year immediately following that year and for each of the 3 immediately preceding years.

How does LHDN calculate my income tax?

Malaysia practices a progressive rate income tax system. This means that your income is divided into different tax brackets and each bracket is taxed at a varying rate, with the highest rate applicable to the highest income bracket.

To ensure equity, every taxpayer in the country is categorized based on their chargeable income and assigned to a specific tax bracket. Consequently, the tax rate that you pay is determined based on the income bracket that you fall under.

The Inland Revenue Board (LHDN) has revised the income bands above RM100,000 per year, starting from the Year of Assessment 2023. This revision is intended to reduce the tax burden on middle-income earners, whilst increasing taxes on the highest earners.

Based on this, your income is taxable based on the below calculations:

What are the YA 2023 tax reliefs?

These are the tax reliefs you can get for YA 2023.

What are tax rebates for YA 2023?

For individual with chargable income less than RM35,000, these are income tax rebates available:

There are also tax rebates for zakat and umrah or other religious trips as below

Real Property Gains Tax (RPGT) for property owners

Beginning January 2022, the government has issued a full Real Property Gains Tax (RPGT) exemption for the disposal of property after 5 years of ownership. This means property owners do not have to pay the 5% or higher RPGT when selling their property in the sixth year onwards, on several conditions:

• The owner must be a Malaysian citizen
• Must be the sole or joint owner of the property to be disposed
• For disposal of RESIDENTIAL PROPERTY only
• SPA for the disposal of the property must be executed by 31 December 2021 and duly stamped by 31 January 2022
• The property being disposed of is not acquired by way of transfer between spouses or is a gift between spouses, parent and child, or grandparent and grandchild

Allowable expenses for RPGT 2023

Any incidental costs incurred in disposing of the property (as follows) can be deducted from chargeable gain to calculate RPGT:

• Legal fees, accounting fees, surveyor’s fees, etc.
• Real estate fees (sales commission)
• Administrative fees
• Repair or renovation to maintain or upgrade the property such as interior design such as IKEA furniture to redecorate your house
• Cost of preserving or defending one’s title to, or to a right over the asset
• Cost of advertising to make the disposal

MORE: RPGT in Malaysia: A brief history, latest exemptions and calculation

Capital allowance for business and property owners

Business owners are allowed to claim deductions on expenditures incurred on certain assets used for business purposes. This is referred to as capital allowance. According to accounting firm KPMG Malaysia, those who bought a property or incurred capital expenditure on plant and machinery that is used for trade or rental business can probably claim capital expenditure.

Expenses incurred could be for the purchase of assets such as motor vehicles, plant and machinery, office equipment, furniture, and computers. There are conditions for claiming capital allowance. For property, capital allowance claims can be made for the refurbishment, fit-out or repair of rental properties, offices, and retail units as well as for leasehold improvements.

Can landlords claim capital allowances?

Generally yes, where the property is leased or rented out. It is, however, critical for the property owner to establish entitlement, especially in a landlord/lessee situation.

Can landlords claim capital allowances in a current year of assessment for buying or refurbishing a property several years before?

Depending on the facts and circumstances, landlords may be able to go back four years to amend their tax returns to include the capital allowances that they should have claimed. Property owners should seek advice from tax consultants.

Do I have to pay tax for my rental income?

Property owners who rent out their units and receive rental income are required to pay tax as long as the property isn’t being used for any business purposes. Rental income tax applies to both residential and commercial assets as well as some types of transportable property such as machinery and ships.

Difference between rental income and business income

There is a significant distinction between rental and business income. Section 4 (d) of the Tax Income Act of 1967 applies to rental income. The letting of real property is also treated as a non-business source if the owner rents out a property, where the tenant enjoys maintenance services or support services that are passively derived (not actively provided by the property owner). An example is when strata property tenants enjoy facilities such as swimming pools and gyms.

Renting a property for business purposes, however, is subject to Section 4 (a) of the Act since it is regarded as business income. Public Ruling (PR) 12/2018 states that rental income is a business income if you provide support or maintenance services comprehensively and actively to your property. These services must be provided by the owner himself or through the hiring of a manager for the services.

In Malaysia, rental income is taxed at a progressive rate of 0%-30%. Rental income is calculated on a net basis, which means the final rental earnings amount is derived after deducting the permitted incurred expenses.

According to the Inland Revenue Board (IRB), expenses that can be deducted from rental income include:

• Assessment tax
• Land tax
• Housing loan interest
• Fire insurance payments
• Recurring expenses in rent collection
• Expenses incurred in tenancy renewal or change
• Property supervision and repair expenses
• Maintenance fee

The following are considered ‘advance expenses and are not tax-deductible:

• The cost of advertising real estate
• Legal costs of preparing rental agreements
• Stamp duty
• Real estate agent commissions

Do gig economy workers get any income tax relief?

More people are participating in the gig economy because they seek greater flexibility in their employment. The gig economy has also provided job opportunities for many who have been afflicted by the COVID-19 pandemic.

Many have become Grab drivers, worked as food delivery persons and joined internet enterprises. So, is it mandatory for individuals who work these part-time jobs to record their YA 2022 earnings?

It depends on the frequency of the part-time work. They can use the BE form to record their incomes under the “other income” column if the jobs are only done once or twice. If the part-time job is done regularly like every month, it is more of a business model and this income must be declared using Form B (Individual with Business Income).

Product purchases for running businesses and goods delivery charges (such as for online businesses) are eligible for tax exemption in form B. Ultimately, for income tax purposes, every revenue-generating activity, including employment in the gig economy, must be reported to the IRB.

In addition, starting in 2022, the IRB will automatically issue Tax Identification Numbers (TIN) to all taxpayers to ensure no one will be able to avoid their tax obligations. TIN essentially refers to a tax file number. Previously, TIN is only issued at the request of taxpayers or employers.

For YA 2022, gig economy workers who undergo micro-credentials upskilling programmes will receive up to RM4,000 in training fees from the Government. Furthermore, an allowance of RM300 for three months will be provided by PERKESO as a replacement income for active gig workers who undergo these training programmes.

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