Reciepts

There people out there that keep their receipts. I am one of those such person. In fact, half of my wallet is made of receipts! This weekend, other than spring cleaning my room, it was time to clear those receipts as well. Why do I keep receipts u ask? Well, certain things require receipts for warranty claims. some required receipts for returns but most importantly some receipts are required for Income tax deductions. Yes, certain things you spend on are actually tax deductible in Malaysia. The usuals are books and computers but there are other things that are tax deductible too. Among others, sports equipment is in the tax relief list too. So, to find out what else is tax exempted, I paid the Inland Revenue Board's website and found this table:

Individual Relief Types
Amount (RM)
Self and Dependent
9,000
Medical expenses for parents
5,000 (Limited)
Basic supporting equipment
5,000 (Limited)
Disabled Individual
6,000
Education Fees (Individual)
5,000 (Limited)
Medical expenses for serious diseases
5,000 (Limited)
Complete medical examination
5,00 (Limited)
Purchase of books, journals and magazines
1,000 (Limited)
Purchase of personal computer

3,000 (Limited)
Net saving in SSPN's scheme

3,000 (Limited)
Purchase of sport equipment for sport activities
300 (Limited)
Subscription fees for broadband registered in the name of the individual.
500 (Limited)
Interest expended to finance purchase of residential property. Relief of up to RM10000 a year for three consecutive years from the first year the interest is paid. 
Subject to the following conditions:
(i) the taxpayer is a Malaysian citizen and a resident;

(ii) limited to one residential unit;

(iii) the sale and purchase agreement is signed between 10th March 2009
and 31st December 2010; and

(iv) the residential property is not rented out.

Where:

(a) 2 or more individuals are eligible to claim relief for the same property ; and

(b) total interest expended by those individuals exceeds the allowable amount for that year ,
Each individual is allowed an amount of relief for each year based on the following formula:


A x B
/C


where;
A = total interest allowable in the relevant year;

B = total interest expended by the relevant individual in the relevant year;

C = total interest expended by all the individuals.

10,000 (Limited)
Husband/Wife/Alimony Payments
3,000 (Limited)
Disable Wife/Husband

3,500
Ordinary Child relief
1,000
Child age 18 years old and above, not married and receiving full-time tertiary education
1,000
Child age 18 years old and above, not married and pursuing diplomas or above qualification in Malaysia @ bachelor degree or above outside Malaysia in program and in Higher Education Institute that is accredited by related Government authorities
4,000
Disabled child 

Additional exemption of RM4,000 disable child age 18 years old and above, not married and pursuing diplomas or above qualification in Malaysia @ bachelor degree or above outside Malaysia in program and in Higher Education Institute that is accredited by related Government authorities
5,000
Life insurance dan EPF
6,000 (Limited)
Premium on new annuity scheme or additional premium paid on existing annuity scheme commencing payment from 01/01/2010 (amount exceeding RM1000 can be claimed together with life insurance premium)
1,000 (Limited)
Insurance premium for education or medical benefit
3,000 (Limited)
    
So, there are quite a number of things that are tax relieved. Nice. Another good things is that Muslims can deduct their Zakat proceeds on a one on one ratio off the actual income tax owed to the government! The tax relief above is only deducted on your taxable income. Therefore it is clear that paying zakat is the best option here. It is required of muslims to do so anyways. You can also pay all of your income tax in the form of zakat.

So, how much do you need to own before you get taxed? well, according to the inland revenue website, it's RM25,501 (after EPF deduction), that is about RM 2125 a month. So i'm assuming that quite alot of us are not really paying any tax....

So, is there a way to a estimate how much your tax would be so that you can pay it all in for of zakat? Zakat is stipulated at 2.5% off you annual income. The tax bands in Malaysia quickly more than that after the first few years of employment as a university graduate. So what is the tax bands in Malaysia? Well, let me help out.


As you can see from the table above, the highest income tax rate in Malaysia is relatively low compared to industrialised countries. If your taxible income is 10k - 20k, you are better off already by paying all your tax due towards your zakat. Note, taxible income is your income minus all the reliefs, deductions and others.

So, now I know which receipts to save in my tax folder and i think I might suddenly need a new badminton racket to get that RM300 tax relief! hehehe.... And I have a few hundred ringgit worth of books to buy too!

But the best is actually if you are a business owner. I know some business owners that purposely give themselves very low salary but the put their benefits and almost everything chargeable to the company. That way he gets very little personal tax but gets all he wants paid for by the company. But the company must be profitable though.

Okay, enough tax talk for one post. Have a good remainder of the weekend guys and gals.