Budget 2013, termed the election or voter friendly budget, is finally out. Proof? No subsidy reductions or GST or increase in tobacco/alcohol duties. As usual, it is a long list of goodies that man in the street like you and me will never really get to enjoy because they are sector or business specific. However, there are things that will matter to most Malaysians regardless of your income level.
There are a few incentives for students and youths as well. So check this out and see if you are eligible for it.
The one statement that most people find it confusing is this:-
“In the transition process from the current tax system, based on income to a tax system that is fairer, the Government proposes that individual income tax rate be reduced by 1 percentage point for each grouped annual income tax exceeding RM2,500 to RM50,000. The measure will remove 170,000 taxpayers from paying tax as well as provide savings on their tax payment. As an example, unmarried young professional with a monthly income of RM5,000 will enjoy income tax savings up to RM425 per person.”
Let us use an illustration to explain this. Take this table from LHDN website.
For someone earning RM 5,000 a month, his annual income is RM 60,000. Hence, his tax payable computation is as follows for YA2012.
Now, with this one percentage point reduction, his tax payable is as such for YA2013
I computed the savings of RM 475 instead of RM 425 though, without the inclusion of other tax relief and rebates.
Anyone spot where I might have made a mistake? Anyway, you get the idea.
To quote from an article in TheStar, – “A significant number of Malaysian families fall into a group with household income of between RM 6,000 to RM 7,000, and they will be able to save an average of RM1,000 on their tax payments each year.” This group usually comprises graduates aged between 27 and 35 who have just been married or have a young family. It is a good move that will benefit the majority of middle income earners, but will not make much difference to the very rich or the poor.
Additional salients point from my pal, Calvin Yeo at Making Passive Income:
“So does that mean only people with chargeable income below RM 50,000 will get entitled to the tax reduction? Or does it mean that for everybody, the tax tier between RM 2,500 to RM 50,000 get reduced by 1% no matter how much the chargeable income is?”
“Another thing that most people don’t see is federal debt is now at RM 502.4 bil, about 53.7% of GDP. It’s rising, and it’s alarming”
Update 1 October 2012
I emailed the author of this news at TheStar, here’s what he replied:
According to the IRB, those tiers are reduced for everyone, no matter how much the chargeable income is.
Post your comments below 🙂