For e-Filing 2021 (YA 2020), let’s take a look at 17 types of personal income tax relief so you could maximise your claims based on the fixed tax relief rate.
This article was translated from Senarai pelepasan cukai pendapatan LHDN untuk e-Filing 2021 (tahun taksiran 2020) by Dayana Sobri.
In general, direct taxes are taxes imposed on the income of individuals or companies. Income tax in Malaysia is paid directly to the government. Examples of direct taxes are income tax and real estate profit tax. The statutory body that imposes direct taxes is the Inland Revenue Board of Malaysia (IRB) or Lembaga Hasil Dalam Negeri Malaysia (LHDN).
In Malaysia, individual income will be calculated based on the current year. The year of assessment (YA) is the year according to the annual calendar. For example, the YA 2020 ends on 31 December 2020. Therefore, at the end of each year, individuals who earn more than RM34,000 a year (chargeable income) will be busy calculating the amount of tax to be paid during that year. Existing taxpayers and newbies may log in or register for the first time at the ezHASiL portal.
Previously, LHDN has postponed the tax payment deadline to 30 June 2020 for the manual system and also the LHDN e-Filing to provide flexibility for taxpayers in Malaysia due to the spread of the COVID-19 pandemic. For the YA 2020, the government has expanded and increased the income tax exemption limit for individuals through Budget 2021 to lift the burden of those who are still affected by the current situation. Taxpayers may start submitting the Income Tax Return Form beginning 1 March 2021. The income tax Malaysia 2020 deadline is on 30 April 2021.
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The differences between YA 2019 vs YA 2020
There are new incentives introduced for income tax relief 2020 compared to tax relief 2019, such as:
- Penjana Special Tax Relief ( Pelepasan Cukai Istimewa Penjana) of RM2,500 for the purchase of a personal computer, smartphone, or tablet effective 1 June 2020.
- Penjana New Tax Relief (Pelepasan Cukai Baru Penjana) of RM1,000, which is tax relief for domestic travel expenses.
- Individual income tax relief of up to RM1,000, which has been given on domestic travel expenses, will also be extended until 31 December 2021.
- Real Property Gains Tax (RPGT) exemption for the sale of residential property/ houses, limited to three houses.
To make it easier for you to plan, manage and file income tax, the following is a list of tax reliefs divided into several main categories.
Individual and dependent relatives
Automatic tax relief of RM9,000 every time you fill out the LHDN e-Filing form.
2. Disabled individual
Every Disabled Person (OKU) gets an additional tax exemption of RM6,000 provided he or she is certified in writing by the Department of Social Welfare (DSW) or JKM as a person with a disability.
Consider yourself lucky if your parents are still around. If you spend on them for their benefits, you’re eligible for tax relief.
Medical treatment, special needs, and carer expenses for parents
If a Malaysian Medical Council (MMC) registered medical practitioner confirms that your parents’ health condition requires specific treatment, any costs incurred to purchase equipment or the care costs of your parents, with proof of document or receipt – you may claim for tax relief amounting to RM5,000.
If your parents do not have any health problems, you can also claim relief of RM3,000; RM1,500 for your mother and RM1,500 for your father. However, make sure that no other sibling claims at the same time.
That said, the following conditions must be met first:
- Birth and adopted children who have been recognised by law.
- Did not make any claims for parental care that requires medical treatment, special care services, and special needs.
- The amount of tax relief should be divided equally according to the number of individuals claiming for the same parent. If there is more than one claimant, the amount will be divided equally. For example, a claim of RM3,000 on both parents by two siblings was submitted. In this case, each of them can only claim RM1,500.
- The parents are Malaysian residents following the provisions of Section 7 of the ITA and aged 60 years and above at any time in that basis year.
- Each parent’s annual income (from all sources whether taxable or not) does not exceed RM24,000 for that YA.
- Claims are eligible only for the expenses incurred on biological parents or adopted parents following the law. For this category, stepparents are not eligible.
In the case where is more than one individual, and each of them is each entitled to claim a deduction in respect of the same parent, information on all individuals claiming the deduction must be maintained in the working sheets to the Income Tax Return Form (ITRF) for the reference and examination of LHDN in the event of an audit.
4. Basic supporting equipment for disabled persons
Tax relief of up to RM6,000 can be claimed for the purchase of special support equipment, whether for the personal use of disabled individuals, spouses, children, or parents. However, they need to be registered with JKM and be certified as OKU. Among the basic support tools that you can claim include:
- Prosthetic legs
- Haemodialysis machines
- Hearing devices
- Contact lenses and glasses are excluded from this category
5. Further education fees (for an individual)
If you further your education either at the Diploma, Bachelor, Master or Doctor of Philosophy (PhD) level by using your own money to pay the fees, you can claim tax relief amounting RM7,000. However, these conditions must be met:
- You’re studying at any professional body in Malaysia or a local institution recognised by the Ministry of Higher Education (MoHE) or approved by the Minister of Finance.
- If you are a student in accounting and Islamic law and finance; the programme must be approved by Bank Negara Malaysia (BNM) or the Securities Commission, as well as fields related to skills, vocational, science, technical, industrial, or technology.
6. Medical expenses for serious diseases and complete medical examination
Critical illnesses that are difficult to treat
Individuals, spouses, or children can get a maximum tax relief of RM6, 000 if they undergo medical treatment for serious or difficult to treat diseases such as Parkinson’s, AIDS syndrome, leukaemia, kidney disease, cancer, and other similar diseases. This also covers the cost of fertility treatment (only for married individuals).
For serious illnesses, including other similar disease syndromes, including Pulmonary Hypertension, heart attack, chronic liver disease, head trauma with neurological deficits, Fulminant Viral Hepatitis, excessive blisters and burns, brain tumours and vascular defects, amputation and/or hand and major organ transplants.
All medical treatment receipts, as well as certificates issued by medical practitioners registered with MMC, must be kept for record and documentation purposes.
Complete medical examination/ Full medical checkup
Maximum tax relief of RM500 is given to individuals, spouses, or their children for a full medical checkup done at any accredited medical centre registered with the Ministry of Health Malaysia (MoH).
You are eligible for maximum tax relief of RM2,500 if you purchase lifestyle equipment (throughout 2020) for yourself, your spouse, or children as listed below:
- Reading materials such as books, journals, magazines, printed newspapers, and other similar publications
- Personal computer, smartphone, or tablet.
- Gym memberships and purchase of sports equipment.
- Internet subscription.
Remember to keep a valid expense receipt.
Also, recently, the government through the PERMAI Assistance Package has extended the tax relief deadline for the purchase of mobile phones, computers and tablets which has ended on 31 December 2020 to another year, until 31 December 2021.
For the National Education Savings Scheme (SSPN), contributors can get tax relief for annual net savings or savings of up to RM8,000 for both SSPN-i and SSPN-i Plus accounts. On top of that, SSPN-i Plus account contributors can also enjoy an additional income tax relief of up to RM11,000 for their Takaful contributions. For your information, this scheme is risk-free because it is guaranteed by the government and is also Shariah-compliant. The dividends received for both SSPN-i and SSPN-i Plus accounts will not be taxed.
9. Deduction for wife and payment of alimony or maintenance to ex-wife
For wives who do not work or have a total income that does not reach the minimum amount taxable, the husband can claim tax relief for the wife of up to RM4,000 and vice versa. Only one wife can make a claim even if the husband has more than one wife.
Besides, a maximum relief of RM4,000 can be claimed by a husband who pays for alimony to his ex-wife. However, it does not qualify as tax relief for the payment of alimony or voluntary alimony to the ex-wife under a mutual agreement without any legally binding agreement.
10. Disabled husband or wife
If you have a partner with a disability, you are entitled to a relief of RM3,500. However, the person must be certified in writing by JKM to be a disabled person.
11. Deduction for children
Children < 18 years
Tax relief of RM2,000 for an unmarried child who is under 18 years old, at any time in the YA
Children > 18 years
Tax relief of RM2,000 for an unmarried child who is 18 years old and above at any time in the YA and studying for skills certification, foundation, A-level, or matriculation. Meanwhile, a tax relief of up to RM8,000 will be given if you have unmarried children aged 18 and above who are still studying, provided they meet the following conditions:
- Undergoing courses at institutions of higher learning recognised by the MoHE
- Pursuing full-time higher education such as diploma, bachelor’s degree in college, university, or another similar educational institute in Malaysia.
- Taking full-time courses outside Malaysia at the undergraduate level including a master’s or doctoral degree or its equivalent.
- An individual serving under a bond of articles or indentures to obtain a trade or professional qualification in Malaysia.
A deduction of RM6,000 for an unmarried child who is physically or mentally disabled regardless of age. In this case, the children must be certified in writing by JKM to be a disabled person.
Disabled children > 18 years pursuing education
A further deduction of RM8,000 for a disabled child who is unmarried and is receiving full-time instruction in or outside Malaysia. This deduction is in addition to the deduction for a child who is a disabled person and must meet the following conditions:
- Pursuing higher education full-time, whether a diploma or bachelor’s degree in college, university or other similar educational institutes in Malaysia.
- Undergoing full-time post-grad level courses outside Malaysia, including masters and doctoral level.
- Individuals serving under the indenture or a bundle of articles attending courses at higher learning institutions recognised by the MoHE to obtain a trade or professional qualification in Malaysia.
12. Purchase of breastfeeding equipment
Tax relief of up to RM1,000 is eligible only for women who meet the following conditions:
- Is a breastfeeding mother.
- Supported by a valid purchase receipt for expenses incurred to obtain breastfeeding equipment for breastfeeding her child aged 2 years and under. Examples of breastfeeding equipment are milk storage and collection containers, ice packs and milk pump sets, and refrigeration bags or refrigeration sets.
- The amount of deduction allowed for the purchase of breastfeeding equipment is limited to a maximum of RM1,000 expended in that basis year for that YA regardless of the number of children and the deduction is allowed once in every two assessment years.
13. Childcare centre and kindergarten fees
Parents (mother or father) who send their children to a day-care centre are eligible to claim tax relief of up to RM2,000.
The childcare centre must be registered with the JKM under the Child Care Centre Act 1984 (Act 308) under the Ministry of Women, Family and Community Development (KPWKM) while a kindergarten is subject to the Education Act 1996 (Act 550) and must be registered with the State Education Department under the Ministry of Education (MoE).
If the parents (mother or father) are assessed separately, the tax deduction for this category can only be claimed either by the mother or father who incurs the expenses.
14. Life insurance, EPF, and approved scheme
The total tax relief for retired civil servants is up to RM7,000. Meanwhile, for other categories of workers, such as private-sector workers and civil servants with no pensions, they are eligible to claim limited tax relief of RM3,000. For civil servants who choose a pension scheme, they are only eligible to claim relief for the payment of insurance premiums or life Takaful only.
For retired civil servants who make contributions voluntarily, they are not eligible to claim relief on their Employees Provident Fund (EPF) contribution payments. Meanwhile, civil servants with no pension or private-sector workers are eligible to claim relief up to RM4,000 for their EPF contributions or other approved schemes; i.e. self-contribution only and does not include employer contributions.
15. Premium for insurance on education or medical benefits
You are allowed to claim for the payments of the insurance premium or Takaful education policy or medical benefits; either for yourself, your spouse, or your children. You can claim up to RM3,000 for this category. Medical insurance includes medical cards that pay for treatment and hospital charges as well as benefits that cover the risk of critical illness.
16. Premium for deferred annuity and contribution to a private retirement scheme
Those who make premium payments in the deferred annuity scheme or join or make contributions to the PRS scheme approved by the Securities Commission will get a tax relief of RM3,000. This relief is only in effect from YA 2012 to 2021 only. Seize this opportunity while you can!
Tax relief not exceeding RM250 is given for contributions made in the YA to the Social Security Organisation (SOCSO) by individuals or borne per the Employees Social Security Act 1969.
Edited by Rebecca Hani Romeli
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