Malaysia Personal Income Tax Guide 2017

It’s income tax season once again! What a nightmare for Malaysian!

If you haven’t file your yearly income tax yet or you are the first-timer who didn’t done it before and have no clue how to plan your taxes well. You need to know that without planning, you won’t be able to maximize on the tax reliefs available and get the tax savings that you are eligible for. Therefore, here is the article cover all the necessary bases when it comes to taxes so you can file and pay yours in a timely manner while saving money at the same time. So, let’s get started!

➊ Know What Your Chargeable Income Is

First of all, you need to know what your chargeable income is. Is it just the monthly salary you get from your employer, or does it also include other types of income?

According to Lembaga Hasil Dalam Negeri (LHDN), with effect from year 2016, an individual who earns an annual employment income of RM 25,501 (after deduction of EPF) has to register a tax file.

The example as at below:

Ben is earning a RM 40,000 per year salary. Ben do have a RM 1,400 interest earned from Fixed Deposit, RM 12,000 from part-time job as well as RM 9,600 from property rental income a year. That’s an annual income of RM 63,000.

Let’s take into account the standard RM 9,000 individual tax relief and a maximum relief of RM 6,000 for EPF contributions.

Assume his EPF contribution is calculated at 11% of RM 40,000. That gives him RM 4,400, which is still under RM 6,000, meaning his EPF earning are completely exempted.

For your information, the interest earned from local bank is tax exempt with effect from August 30, 2008. Therefore, RM 1,400 interest earned from Fixed Deposit doesn’t count either.

By applying these exemptions and reliefs, Ben’s chargeable income will actually be like below;

Total annual income – Tax Exemptions – Tax Reliefs

RM 63,000 – RM 1,400 – (RM 9,000 + RM 4,400) = RM 48,200. A much lower figure than you initially though it would be.

Of course, these exemptions mentioned in the example are not the only one. Which is why we’ve included a full list of income tax relief 2017 Malaysia here for your calculation;

Individual Relief Types
Amount
Self and dependent
RM9,000
Insurance & other policies
Life insurance and EPF
RM6,000
Deferred annuity and Private Retirement Scheme (PRS) – with effect from year assessment 2012 until year assessment 2021
RM3,000
Insurance premium for education or medical benefit
RM3,000
Contribution to the Social Security Organisation (SOCSO) RM250
Applicable to certain taxpayers
Husband/Wife/Alimony payments
RM4,000
Medical expenses for parents

OR

Parent

Limited 1,500 for only one mother

Limited 1,500 for only one father

RM5,000
OR

RM3,000

Education fees (Individual)
RM7,000
Medical expenses for serious diseases
RM6,000
Complete medical examination
RM500
Purchase of books, journals, magazines and publications
RM1,000
Purchase of personal computer (once in every 3 years)
RM3,000
Purchase of sport equipment for sport activities (i.e. racquets, balls, golf sets)
RM300
Disabled individual
RM6,000
Disabled wife/husband
RM3,500
Basic supporting equipment (for disabled self, spouse, child or parent)
RM6,000
Applicable to tax paying parents
Ordinary child relief
RM2,000
Each unmarried child of 18 years and above who is receiving full-time education (“A-Level”, certificate, matriculation or preparatory courses)
RM2,000
Each unmarried child of 18 years and above that is:
(i) receiving further education in Malaysia for diploma or higher (excluding matriculation/preparatory courses)
(ii) receiving further education outside Malaysia for degree or its equivalent (including Master or Doctorate)
(iii) the instruction and educational establishment shall be approved by the relevant government authority
RM8,000/per child
Disabled child
RM6,000/per child
Additional exemption per unmarried disabled child age 18 years old and above, who is pursuing:
(i) diplomas or above qualification in Malaysia
(ii) bachelor degree or above outside Malaysia in programme and in Higher Education Institute that is accredited by related Government authorities
RM6,000/per child
Net saving in SSPN’s scheme (with effect from year assessment 2012 until year assessment 2017)
RM6,000

There really are a lot of tax reliefs and if you plan your reliefs effectively every year, you could be saving thousands in taxes every year.

➋ Know the Tax Rates

It’s always a percentage of your chargeable income (more on that later). The more you earn, the higher the percentage of tax you need to pay. However, that higher percentage is only applied to the amount that’s higher. So you never end up with less net income after tax even if you earn more. Let’s look at the tax rates for the Year of Assessment 2016, so we can calculate how much tax you will be paying for last year’s assessment.

Chargeable Income
Calculations
Rate
Tax
RM0 – RM5,000
On the First RM2,500
0%
RM0
RM5,001 – RM20,000
On the First RM5,000
RM0
Next RM15,000
1%
RM150
RM20,001 – RM35,000
On the First RM20,000
RM150
Next RM15,000
5%
RM750
RM35,001 – RM50,000
On the First RM35,000
RM900
Next RM15,000
10%
RM1,500
RM50,001 – RM70,000
On the First RM50,000
RM2,400
Next RM20,000
16%
RM3,200
RM70,001 – RM100,000
On the First RM70,000
RM5,600
Next RM30,000
21%
RM6,300
RM100,001 – RM250,000
On the First RM100,000
RM11,900
Next RM150,000
24%
RM36,000
250,001 – 400,000
On the First RM250,000
RM47,900
Next RM150,000
24.5%
RM36,750
RM400,001 – RM600,000
On the First RM400,000
RM84,650
Next RM200,000
25%
RM50,000
RM600,001 – RM1,000,000
On the First RM600,000
RM134,650
Next RM400,000
26%
RM104,000
Exceeding 1,000,000
On the First RM1,000,000
RM238,650
Next ringgit
28%
RM….

Here is an example of how to calculate your tax based on the personal income tax rate above;

Example of Chargeable income: RM 48,300

Income
Rate
Tax
First RM 5,000
0%
RM 0
Next RM1 5,000
1%
RM 150
Next RM 15,000
5%
RM 750
Next RM 15,300
10%
RM 1,530
Total chargeable income: RM 50,300
Total tax: RM 2,430

You can calculate your taxes based on the formula above, and just make sure your total income in the first column comes up to your total chargeable income.

If you found out that you’re overpaying your taxes when you file it, don’t worry, you can get back the additional taxes that you have paid in the form of tax return or tax refund.

Tax return is the amount you have overpaid your taxes on and this commonly occurs when the taxpayer is subjected to MTD, and the monthly deduction does not include additional tax reliefs, such as purchase of approved items like books or personal computer, or unplanned expenses like medical expenses for serious illness.

If you are using income tax e-Filing to file your tax and you provide your bank account details correctly, you will be getting your refund credited directly into their bank accounts within 30 days after the declaration is made. Starting from Year of Assessment 2013, any taxpayers who do not receive their refund from LHDN within the 30 days will be compensated.

If the terms and conditions are met for the late refund, the taxpayers will be given 2% compensation.

For those who do not provide bank account details to LHDN and was receiving tax refund in the form of cheques, the payment method will be replaced with a new voucher system, known as tax refund voucher system (BBBC). The voucher for tax refund can only be banked in or cashed out at CIMB and CIMB Islamic branches in the country.

➌ Know How to Pay Income Tax

If you have paid your income tax payment in excess via the monthly tax deductions, the excess amount will be reimbursed to you via the bank account details that you had provided. For those who do not provide bank accounts, you will be reimbursed via cheques or the new tax refund voucher system (BBBC), which will be implemented in stages.

However, if you have taxes due, you can pay through various methods, such as e-banking, collection agents, and the ATMs to name a few. You can also pay your income tax via credit card. If you are looking for a card that will reward you for your tax payment, check out all the credit cards available in Malaysia.

Here are the many ways you can pay for your personal income tax in Malaysia:

1) Pay income tax via FPX Services

The FPX (Financial Process Exchange) gateway allows you to pay your income tax online in Malaysia. First of all you need an Internet banking account with the FPX participating bank.

To make the payment, please go to ByrHASiL at https://byrhasil.hasil.gov.my/

2) Pay income tax via credit card

You can pay your income tax with your credit card through FPX participating bank at https://byrhasil.hasil.gov.my/

All VISA, Mastercard and American Express credit cards issued in Malaysia can be used for this service.

3) Pay income tax via LHDN Agents

You can choose from several methods when paying through an appointed agent.

a) Pay your tax over the counter at bank branches

You can pay for your Income Tax, Real Property Gains Tax (RPGT) and Monthly Tax Deduction (MTD) by cash, cheque, and instruction to debit account at the following LHDN agents’ branches nationwide:

  • CIMB Bank (MTD)
  • Public Bank (MTD)
  • Maybank
  • POS Malaysia (cash payment only)
  • Affin Bank
  • Bank Rakyat
  • RHB Bank
  • Bank Simpanan Nasional

You need to provide the following information in the payment slip:

  • Payment Code
  • Name of Taxpayer/Employer
  • Income tax number/Employer number
  • Identity card number
  • Year of assessment of the respective payment/Year and month of the MTD payment
  • Payment amount

b) Pay your income tax online

Below are the appointed agents that have the electronic payment facilities to receive tax payments.

Income tax payment
MTD payment
RGPT payment
www.alliancebank.com.my
/
www.cimbclicks.com.my
/
/
www.cimbbizchannel.com.my
/
https://www.hlb.com.my/main/
/
/
www.maybank2u.com.my
/
/
https://logon.rhb.com.my
/
/
www.rhb.com.my
/
www.posonline.com.my
/
/
https://www.mybsn.com.my
/
/
https://portal.citidirect.com
/
/
/
www.maybank2e.net
/
/
/
www.pbebank.com.my
/
/
/
https://www.ambankgroup.com/
eng/Business/TransactionBanking
/
www.ocbc.com.my
/
HSBC call 1300-88-1128 or
603-8321 5511
/
https://ebanker2.bankislam.biz
/

Taxpayers receive their tax returns via CIMBClicks, Bank Rakyat, Hong Leong Online, RHB Bank, MEPSCASH, Bank Islam, Al-Rajhi Bank and Affin Bank.

c) Pay your tax at the ATM

You can also make your payment for individual Income Tax and RPGT via Auto Teller Machine (ATM) at appointed agent banks as follows;

  • Public Bank Berhad
  • Maybank Berhad
  • CIMB Bank Berhad

You must have an ATM card from the respective bank to proceed with payment and you also need to provide your income tax reference number to complete the transaction.

d) Pay your tax via tele-banking

Payment of individual Income Tax and RPGT can be made via tele-banking service only at Maybank Berhad – Kawanku Phone Banking (1-300-88-6688).

e) Payment via Cheque Deposit Machine (CDM)

You can also make your individual Income Tax and RPGT payment using a CDM at Public Bank Berhad.

f) Payment via Cash Deposit Machine (CAM)

If you are more comfortable making the payment in cash, you can do so for your personal Income Tax and RPGT payment using a Cash Deposit Machine (CAM) available at CIMB Bank Berhad.

➍ What’s the penalty for late income tax payment?

If you failed to make the full payment after April 30 following the year of assessment, you will be charged a late payment penalty of 10% on the balance of tax not paid.

If the tax and penalty imposed is not paid within 60 days from the date the penalty is imposed, a further penalty of 5% will be imposed on the amount still owing.

Here’s an example:

Balance of tax not paid after April 30: RM 700

First late penalty (10%): RM 70

Total tax payable: RM 770

If the above is still not paid after 60 days, you will be charged another 5% on the RM770, making your total tax payable come up to RM 808.50.

➎ Know the taxpayer’s responsibilities 

Besides of declaring your income and reliefs, and submitting your tax files before the deadline stipulated by LHDN, taxpayers are also responsible for record keeping.

All the taxpayers are required to keep the following documents for up to 7 years from the end of the year in which the Income Tax Return Form (ITRF) is filed:

  • EA/EC Form
  • Original dividend vouchers
  • Insurance premium receipts
  • Books purchase receipts
  • Medical receipts
  • Donation receipts
  • Zakat receipts
  • Children’s birth certificates
  • Marriage certificate
  • Other supporting documents
  • Working sheets (if any)

This is super duper important as LHDN has the right to request for any supporting documents for taxes paid previously. So if you’re filing for reliefs, make sure you keep your documents in well condition.

Failure to present the supporting documents during a tax audit can result in tax penalty of RM 300 to RM 10,000, or imprisonment, or both! Find out more bout tax audit and tax penalties here.

With this handy guide, we hope we have answered most of your basic income tax filing questions in Malaysia.

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