According to the Malaysian Income Tax Act, all Malaysian citizens and foreigners who live in Malaysia for more than 182 days in a year must file a tax return as long as they have income.
Many people may wonder: “My income is not high, do I still need to file a tax return? The tax declaration is to report to Lembaga Hasil Dalam Negeri Malaysia (LHDNM) the income earned in the previous year. These incomes include work salaries, commissions, property rents, bonuses, and more. It is worth mentioning that interest income from bank time deposits does not need to be reported.
After filing your tax return, the (LHDNM) will calculate whether you need to pay tax based on the criteria set by the government. Taxing means paying taxes. If your income in the last year is taxable, then you need to go through the process of paying tax to the government.
According to the statute, there are only 5 cases in which personal income tax is not required:
1. Work less than 60 days
2. Working in Malaysia Shipping courier
3. Age 55 and pensioner
4. Accept bank interest
5. Receive tax-free dividends
Usually, when filing a tax return, we will see 3 items: taxable income (Pendapatan Bercukai), deduction items (Pelepasan Cukai), and tax deduction items (Potongan Cukai).
Calculation of taxable income (Pendapatan Bercukai):
Taxable income = annual income – deductions – deductions
Pendapatan Bercukai = Pendapatan Tahunan – Pelepasan Cukai – Potongan Cukai
Here is an example, hoping to make it better for everyone to understand:
Alice’s monthly salary (basic salary + allowance + OT) is RM 3,000 and year-end bonus is RM 3,500. So the annual income is (RM3,000 X 12 months) + RM 3,500 = RM 39,500.
Deductions are based on a list of tax-deductible items that you can deduct income tax when you buy or spend on these items. In addition, taxpayers earning less than RM8,000 per month can deduct RM9,000 in personal expenses. Tax deductions can be made when donations are given to recognized and certified charities.
Therefore, Alice can get the following deductions (Pelepasan Cukai):
1. Personal burden RM 9,000
2. EPF RM 3,960 (11% per month)
3. Purchase medical insurance RM2,500
4. Purchase books RM 250
RM 9,000 + RM 3,960 + RM 2,500 + RM 250 = RM 15,710
Alice can also get the following tax deductions (Potongan Cukai):
1. Donate to charity RM 120
Taxable Income (Pendapatan Bercukai)
= Annual Income – Deduction Items – Tax Deduction Items
= RM39,500 – RM15,710 – RM120
= RM23,670
According to the latest personal income tax rate list for the tax year 2021, Alice’s taxable income (Pendapatan Bercukai) is between RM20,000 – RM35,000. Therefore, the tax that Alice should pay:
= first RM 20,000 tax + second RM 3,670 (3% tax rate)
= RM 150 + RM 110.10
= RM 260.10
According to Rebat Cukai, if the income is less than RM35,000, she can get an RM400 rebate, so Xiaomei does not need to pay tax.
