Claim the Right Amount of Tax Relief

e tax filing dateline for employees (BE form) has been extended for another 2 weeks until 15 May, in case you are not aware of this already or your financial planner didn’t tell you.

Here’s another thing you should know about claiming tax relief for your insurance policies – NOT every cent of the annual premium paid over the past year is eligible for tax relief. Error in keying in this amount into your life insurance (lumped with EPF totaling RM 6000 max) or medical insurance tax relief (max RM 3000 lumped with education insurance) could potentially subject you to penalty. Ignorance in this also could lead to you claiming LESS than you are eligible to claim.

I am referring to “riders” of an insurance policy. Riders cost money, and it form a part of your entire insurance premiums. These riders could be personal accident or certain waiver of premiums feature – which are not “claimable”. But you don’t need to know the details – all you need to do is to look at your Statement of Premium Paid to know the benefit type and the tax relief category. For anything that fall under LIFE or MEDICAL, it is very clear-cut.

But any insurance policy with Critical Illness Rider (aka 36 Dread Diseases) would be under MEDICAL/LIFE category in your statement. This is when it get interesting.  60 percent of the premiums paid under this category are claimable under Medical tax relief … OR….100 percent of it is claimable under Life.  Now for most people, the RM 6k EPF + Life insurance would have already been maxed out easily just by EPF portion alone. So what you do if you have life insurance with critical illness rider? You take 60% of the premiums paid under MEDICAL/LIFE category for such policy and claim it under Medical tax relief.

Like here:

medical life tax relief

Did you insurance agent ever tell you this? Just curious. Mine – never – I figure it out only about a year ago. Dumb.

And here’s a fancy tax relief infographics from iMoney.my

tax-infograph-highres (1)

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