Filing for your tax for year of assessment 2019 but aren’t sure if you are maximizing all your Malaysian income tax relief?
Then you have landed in the right page.
Because this is the most comprehensive and practical guide on income tax relief in Malaysia, for the non-tax savvy you…yes you!
The best part?
If you digest this by Dec 2019, then in April 2020, you don’t need scramble around to find the receipts for items you purchased the year before.
Let’s get started by picking a subtopic below
The easiest Malaysian income tax relief to be eligible for
|EPF (KWSP) contribution INCLUDING not through salary deduction (3)||RM 4000|
|Contribution to the Social Security Organization (SOCSO)||RM 250|
(i) Purchase of books journals, magazines, printed newspaper and other similar publications (except banned reading materials);
(ii) Purchase of a personal computer, smartphone or tablet; (1)
(iii) Purchase of sports equipment for any sports activity as defined under the Sports Development Act 1997 (excluding motorized two-wheel bicycles) and gym memberships; (2)
(iv) Payment of monthly bill for internet subscription
|RM 2,500, including child & spouse|
(1) Hybrid computers include Microsoft Surface, Windows 8 Hybrid Laptop, refer to devices that possess attributes of a personal computer and a tablet with the use of a convertible / detachable keyboard and touchscreen.
Taxpayers cannot claim income tax reliefs for hybrid computers by placing it under personal computers as LHDN considers hybrid computers as a separate categories of devices.
(2) Equipment like dumbbell, golf set, footballs, shuttlecocks, nets, rackets, martial arts weapons, fencing swords, electronic scoreboards are considered as sports equipment. Meanwhile, jerseys, sports shoes, pants, swimsuits are considered as sports attire, which means you can’t claim for a lifestyle income tax relief.
(3) A voluntary contribution made by an individual to an approved provident is not allowed as a tax deduction. However, the ‘voluntary contribution’ restriction does not apply to a self employed person who contributed to the EPF.
The most overlooked Malaysian income tax relief you can miss out
|Life insurance||RM 3000|
|Insurance premium for education or medical benefit INCLUDING not through salary deduction (1)||RM 3000|
I purchased insurance policies for my two children under my wife’s name but I am paying the premium using auto debit from my credit card. Can I claim this?
To qualify for the this income tax relief, the Malaysian insurance policy must be in your name (policy owner as the claimant).
(1) A medical policy must satisfy the following criteria –
(a) the expenses should be related to the medical treatment resulting from a disease or an accident or a disability;
(b) the policy coverage should be for a period of 12 months or more;
(c) the policy can be a stand-alone policy or as a rider to a life insurance policy. If it is a rider, only the rider premium can qualify for tax relief;
(d) where a dreadful disease cover is attached to a basic policy, the whole amount of the rider premium paid is allowed as a tax relief;
(e) where a dreadful disease cover is packaged together with a term life/personal accident cover, 60% of the package premium is allowed as a income tax deduction;
(f) group medical policy where the employee pays the premium for the medical benefit also qualifies for income tax deduction; and
(g) premium for waiver benefit rider and travel and medical expenses insurance are not allowable as a tax deduction.
The easiest mistake to make in claiming income tax relief
Scenario #1 – You only have a medical card (which you are paying RM 2,000 annually) and you put in the entire RM 2,000 under the “Insurance premium for medical benefit” tax relief. However, when you are singled out for random audit by LHDN, the taxman say you are over-claiming this tax relief by RM 300.
You wonder what’s wrong?
Scenario #2 – You have 1 insurance policy which consist of Life insurance, Critical Illness coverage and a Medical Card.
When you want to do your tax filing, you are utterly confused on how to split the different components (riders) and their corresponding premiums into the 2 categories of insurance tax reliefs (3,000 + 3,000)
The answer lies in the table below:
|You can claim for income tax relief for life insurance premiums on your own life or the life of your spouse||RM 6000 (both,
each, for separate assessment)
|Whether you have a medical rider or a standalone medical policy, 100% of the premiums paid is eligible||RM 3000|
|For policy/rider where dread disease coverage is packaged together with term life coverage, 60% of the total premiums paid may be allowed for deduction for Medical||RM 3000|
|You may claim for tax deduction for a policy purchased as an education policy for your child(ren)||RM 3000|
|As per Lembaga Hasil Dalam Negeri guideline dated 6 June 2005, premiums paid via Automatic Premium Loan are NOT entitled for tax relief||Not
Note: (1), (2) and (3) are combined, not separate.
Now, it’s really not easy to maximize your life or heath insurance coverage with the limited income tax reliefs (3,000 + 3,000) available to your every year.
In other words, you want to buy 1 million life insurance with 250k critical illness coverage and a decent medical card, using the combined RM 6,000 tax reliefs, instead of just 200k Life & Critical Illness insurance with no medical card, don’t you agree?
But most insurance agents or intermediaries like to do the latter for you, so that they tend to maximize their earned commissions by recommending you the expensive plans unnecessarily, often without good reasons.
Without you even knowing! Because you don’t know what you don’t know.
But we want to ‘save’ you from such predicament.
That is what we are doing every day inside AskCF.com, a paid membership site where you can get non-biased, independent answers to your urgent financial question(s), like paying a consultation fee visiting your doctor.
If you know follow our custom-tailored recommendations in AskCF.com, you not only obtain the best value out of your tax-deductions-eligible insurance premiums for yourself…
…you will also be able to squeeze out more value (coverage) out of the eligible insurance tax reliefs (premiums) to further extend insurance coverage for your spouse and children, wherever applicable.
You save tens of thousands of Ringgit over the years in the process with a single actionable advice.
Here’s a good example of an actual insurance income tax reliefs annual statement which you MUST USE to file for your Borang B or BE every year
How to use investment to claim more Malaysian income tax relief
|Deferred Annuity and Private Retirement Scheme (PRS) – with effect from year assessment 2012 until year assessment 2021 (1)||RM 3000|
|Net saving in SSPN’s scheme (total deposit during the year MINUS total withdrawal in the same year) (2)||RM 8000|
(1) Section 49(1D) of the Income Tax Act (ITA) provides that income tax deduction not exceeding RM3,000 can be claimed by an individual who has
(a) paid premiums for a deferred annuity; or
(b) made or suffered the making of a contribution to a private retirement scheme approved by the Securities Commission.
(2) SSPN is a saving scheme introduced by the Perbadanan Tabung Pendidikan Tinggi Nasional (PTPTN). PTPTN was established under the Perbadanan Tabung Pendidikan Tinggi Nasional Act 1997. It is a pre-requisite for taking a PTPTN loan.
SSPN (National Education Savings Scheme) was introduced by the Malaysian government in 2004 to enable parents to save and eventually finance their children’s education at higher learning institutions.
To encourage individuals to deposit into SSPN, paragraph 46(1)(k) of the ITA was introduced to allow an income tax deduction for individuals who make deposits into the scheme
Account opening can be made online, via PTPTN counter or agent, and banks like Maybank, Bank Islam, RHB Bank, Agrobank, Bank Islam. No restrictions on the number of SSPN account you can open.
How to use your parents to claim higher income tax relief
|Medical expenses for parents (1)||RM 5000|
|Parents: Limited 1,500 for only one mother & Limited 1,500 for only one father (2)||RM 3000|
(1) Medical expenses for parents which qualify for deductions include:
- Medical treatment expenditures for parents who are diagnosed with diseases or physical/mental disabilities
- Medical care for parents provided by a nursing home
- Dental treatment limited to tooth extraction, filling, scaling and cleaning but excluding cosmetic dental treatment
- Special needs expenditures such as nutritional food and disposable diapers
You must substantiate your claim for this income tax relief in Malaysia with written evidence/prescribed/endorsed by a certified medical practitioner registered with the Malaysian Medical Council (MMC) supported by purchase/payment receipt. Carer must have written certification or valid work permit, excluding the spouse or children, if any, of person receiving care.
On top of that, the parents shall be resident in Malaysia and the medical treatment or care services must be provided in Malaysia.
(2) This income tax relief can be shared with other siblings provided that the total tax relief claimed does not exceed MYR 1,500 for a mother and MYR 1,500 for a father.
a) If two or more children were to claim the tax deductions, each child is eligible to claim a portion of the total RM1,500 on behalf of the mother and another portion of the total RM1,500 on behalf of the father, where the cumulative total claims from all children are limited to RM3,000 only.
To claim this income tax relief, the Malaysian taxpayer must fulfill all the following conditions:
- The taxpayer does not claim expenses related to the medical treatment and care of parents.
- The parents are the legitimate natural parents and foster parents in accordance with the law (subject to a maximum of two persons).
- The parents are aged 60 years and above.
- The parents are tax residents in Malaysia in the current year of assessment.
- The parents have an annual income not exceeding MYR 24,000 per annum for each parent. Income means any income that is obtained from salary, business gains, pensions, interest (including interest from fixed deposit) and etc.
- This is planned to be effective from 1 January 2016 to 31 December 2020.
How to use your spouse for more Malaysia income tax relief
|(i) Purchase of books journals, magazines, printed newspaper and other similar publications (except banned reading materials) for spouse;
(ii) Purchase of a personal computer, smartphone or tablet for spouse;
(iii) Purchase of sports equipment for any sports activity as defined under the Sports Development Act 1997 (exclude motorized two-wheel bicycle) and gym memberships for spouse;
self & child
Using your children to claim even more Malaysian income tax relief
|(i) Purchase of books journals, magazines, printed newspaper and other similar publications (except banned reading materials) for child;
(ii) Purchase of a personal computer, smartphone or tablet for child;
(iii) Purchase of sports equipment for any sports activity as defined under the Sports Development Act 1997 (exclude motorized two-wheel bicycle) and gym memberships for child;
self & spouse
|Ordinary Child relief or each unmarried child of 18 years and above who is receiving full-time education (“A-Level”, certificate, matriculation or preparatory courses).||RM 2000 each|
|Purchase of breastfeeding equipment (1)||RM 1000|
|Insurance premium for education or medical benefit INCLUDING not through salary deduction (3)||RM 3000|
|Net saving in SSPN’s scheme (total deposit during the year MINUS total withdrawal in the same year) (4)||RM 8000|
|Child care fees to a Child Care Centre or a Kindergarten (2)||RM 1000|
|Each unmarried child of 18 years and above that:
(i) receiving further education in Malaysia in respect of an award of diploma or higher (excluding matriculation/preparatory courses).
(ii) receiving further education outside Malaysia in respect of an award of degree or its equivalent (including Master or Doctorate).
(iii) the instruction and educational establishment shall be approved by the relevant government authority.
|RM 8000 each|
(1) The types of breastfeeding equipment that are entitled to this income tax relief in Malaysia are the breast pump kit (manual and electronic), ice pack, breast milk collection/storage equipment and a cooler set/bag. Only claimable once every two years. Obviously, it’s only available for women.
(2) Lembaga Hasil Dalam Negeri (LHDN aka Inland Revenue Board) introduced this income tax relief in Malaysia for the parents with infants or children under 6 years old, and paying childcare fees. However, this income tax relief is not applicable for private nannies or caretakers. Also, only either of the parents can claim the tax relief for childcare fees, not both.
The qualified registered child care centres and kindergartens eligible can be found from the directory on the Department of Social Welfare’s website. As always, request and keep all relevant invoice/receipts.
(3) An education policy must satisfy the following criteria –
(a) the policy must be contracted by the individual for himself/herself, his/her spouse or child;
(b) the beneficiary should be the child;
(c) where the insured is the parent, the child must be the nominee;
(d) where the child is the insured,
(i) it is compulsory that the life of the person paying the premium (parent) must be covered (payor benefit rider);
(ii) the rider must also have the same duration as the basic policy;
(iii) where the rider is packaged together with the basic policy in a single premium, the whole premium paid will qualify for tax deduction; and
(iv) where the payee of the policy does not qualify for payee benefit, the premium paid for the basic policy will not qualify for tax deduction.
(e) In respect of a takaful policy, the participant is the parent and proceeds of the policy must be made “hibah” (gift) to the child;
(f) The maturity amount in respect of both conventional or takaful policy must be scheduled to be payable when the child is between the ages of 13 and 25.
(4) SSPN provides the following extra benefits
- Matching RM500 savings for RM500 invested in for children aged 7-12 (withdrawable only after age 18)
- Free takaful insurance with minimum deposit RM1,000.
- Consideration for matching grant of up to RM10,000 for eligible families with monthly base pay below RM4,000.
- Savings guaranteed by the Malaysian government.
SSPN partial withdrawal can be at any time with min RM20 to keep account active.
SSPN complete account closure can be done at any time. You can opt to reopen your account again.
SSPN account closure also occurs upon depositor death.
SSPN account closure requires submission of deposit withdrawal form, account closure form, copy of savings account book front page, and matching grant form/death certificate/other relevant documents (if applicable). You can actually close your SSPN account (full withdrawal) at any time, not necessarily for the purpose of your child admission to higher institutions of learning.
Account closure takes up to 14 working days with full and complete documents submission.
Uncommon Malaysian income tax relief and deduction
|Basic supporting equipment for disabled self, spouse, child or parent (1)||RM 6000|
|Disabled Individual||RM 6000|
|Education Fees (Self) (2)
(i) Other than a degree at Masters or Doctorate level-for acquiring law, accounting, Islamic financing, technical, vocational, industrial, scientific or technological skills or qualifications;
(ii) Degree at Masters/Doctorate level-for acquiring any skills or qualification
|(i) Medical expenses for serious diseases for self, spouse or child (3)
(ii) Complete medical examination for self, spouse, child – 500 (Limited)
|Husband/Wife/Alimony Payments (4)||RM 4000|
|Disabled Spouse||RM 6000|
|Disabled child||RM 6000|
|Extra exemption of RM8,000 disabled child age 18 years old & above, not married and pursuing diplomas or above qualification in Malaysia or bachelor’s degree or above outside Malaysia in program and in Higher Education Institute that is accredited by related Government authorities||RM 8000|
|Approved Donations / Gifts / Contributions
Gift of Money to the Government, State Government or Local Authorities
Gift of Money to Approved Institutions / Organisations / Funds
Gift of Money for Any Sports Activity Approved by the Minister of Finance
Gift of Money or Cost of Contribution In Kind for any Project of National
Interest Approved by the Ministry of Finance
Restricted to 7% of Aggregate Income
(1) Basic supporting equipment includes haemodialysis machine, wheelchair, artificial leg and hearing aid but excludes optical lenses and spectacles
(2) If you’re pursuing a certificate/diploma, bachelor’s degree in say, English Literature, Performing Arts, Philosophy, Anthropology – basically non-vocational – you’re not eligible for the education tax relief.
(3) Cancer, heart attack, pulmonary hypertension, renal failure, chronic liver disease, fulminant viral hepatitis, brain tumour, major burns, major organ transplant, Parkinson’s Disease, HIV/AIDS, major amputation of limbs, head trauma, chronic skin disease, diabetes mellitus, major thalassemia, rheumatology and leukemia
If you have mental health condition, you can claim for tax relief for your medications, therapy and check up.
From Year of assessment 2020 (not applicable for 2019,2018,2017), couples seeking fertility treatment such as in-vitro fertilisation (IVF), intrauterine insemination (IUI) or any other fertility treatment approved by a medical practitioner registered under the Malaysian Medical Council (MMC), can also claim under this income tax relief in Malaysia.
The receipt must also bear the individual’s name. So for instance, if the receipt bears the husband’s name, he can claim the tax relief and the same applies if the receipt is under the wife’s name.
If both husband and wife have receipts for the fertility treatment, both can claim up to a maximum of RM6,000 respectively (total of RM 12,000)
(4) Voluntary alimony payment to a former wife under a mutual agreement but without any formal agreement does not qualify as a deduction
What’s the difference between these 2 type of malaysian income tax deductions, namely income tax rebate and income tax reliefs in Malaysia?
Chargeable Income = Total annual income – Tax Reliefs
Tax payable is calculated based on your chargeable income
But Final Tax Payable = Tax payable – Tax rebate
In other words, tax reliefs reduce your chargeable (taxable) income
While tax rebates directly reduce the amount of tax you need to pay.
Is it true that I heard women who return to work can get some sort of income tax relief or tax break?
True. If you’re on a break for more than 2 years and have decided to get back to work, you’re eligible for a one-year individual income tax exemption. This would mean you’re saving a lot of money especially when your income falls into a higher tax bracket.
This tax break programme has been implemented since 2019and will be overseen, as well as managed by a GLC called TalentCorp. Just remember to submit your application to TalentCorp before 31 December 2019. The exemption would be effective for Year of Assessment 2018 to 2020.
This is to cater for women who made the choice to take a break from the workforce after having kids because they want to focus on becoming full-time moms. So to encourage more women to continue their careers and increase the contribution to the national economy, the government has offered a financial incentive.
I purchased supplements which helps in controlling my [medical condition]. However, this is not a prescription from a doctor as I just follow the pharmacist’s recommendation. Am I able to claim for it?
See above. The purchase of supplements or even medication without a doctor’s prescription would not fall within this definition and therefore it is not claimable as a tax relief.
I am on anti-allergy medication. Is the medical costs claimable under Malaysian income tax relief?
See above. Since the definition exemplifies diseases which are serious and chronic in nature, this does not fall within this definition.
I want to claim tax relief for my parents’ medical expenses but receipts are under their name. How should I go about this?
You can claim the tax relief, provided that the tax relief is evidenced by a medical practitioner’s receipt to certify that the treatment was provided for your parents.
Where the receipts are issued in your parents’ names, you may need to substantiate your relationship with your parents by showing proof such as your birth certificate, in the event of an audit by the Inland Revenue Board.
I have a sister who has mental illness and has been staying at a nursing home. He is on full-time medication and consultation at HKL. His monthly nursing home fee is RM 950, which totals RM 11k per year. Can l claim income tax relief of RM6,000 under disabled individual?
The income tax relief of RM6,000 for disabled individual is applicable to a taxpayer who is himself/herself disabled, not his/her siblings. Therefore, you are not entitled to the tax relief.
Can I claim medical expenses for my father-in-law? He is living with me and I pay for all her medical fees.
The tax relief of up to a maximum of RM5,000 is in respect of medical expenses expended by taxpayer for his or her own parents. You are not entitled to claim the tax relief for your in-laws.
I heard we can claim rental income tax exemption; how?
Introduced in Budget 2018, rental income from residential investment properties would be eligible for a 50% exemption from income tax.
To be eligible for this tax exemption, you need to fulfill these requirements:
- Your real estate property is an apartment, flat, landed, or anything otherwise legally designated as residential title
- The monthly rental for each property is no more than RM2,000
- The tenancy agreement has to have been stamped and executed on or after 1 January 2018.
- Actual tenancy takes place in the year of assessment 2018 to 2020 (tax filing done between 2019 and 2021).
Should I file for individual tax assessment or joint tax assessment?
First of all, you must be married to your partner. Being engaged to your fiancee or cohabiting with you boyfriend/girlfriend do not count under Section 45 of Malaysia’s Income Tax Act 1967.
Consider the following 2 scenarios.
Joint assessment Scenario #1
Husband earns salaried income, wife has zero or no significant income, and vice versa. No business income available although investment income may be present.
Electing for joint assessment under the income earning spouse is recommended, as s(he) can claim for RM 3,000 spousal tax relief.
Joint assessment Scenario #2
Husband possesses business income, wife has salaried income, and vice versa. Business suffer losses in the year of assessment, therefore choosing joint tax assessment under the salaried spouse’s name is usually ideal.
Because both husband and wife’s income is aggregated and regarded only as one single individual from tax perspective.
Generally when both husband and wife are high salaried income earners in the year of tax assessment, or either one or both of them are generating profit from businesses, it is always advisable to choose separate assessment to double leverage on the relevant income tax reliefs and deductibles.
Choosing joint tax assessment would usually land them in a higher tax bracket, plus, you lose the ability to double leverage on the applicable income tax reliefs, especially the no-brainer, no receipt required RM9,000 individual tax relief.
Furthermore, in the case of separate individual assessment with children, it will be more worthwhile to claim for children tax relief under the spouse with the higher income.
A point to note though, is that you both parents cannot claim children tax relief for the same child.