PERSONAL INCOME TAX (2012) The purpose of INCOME TAX is to provide financing for government expenditure. Taxable Income The taxable incomes are from the employment such as salary. Deduction on Donation An individual can claim the deductions for cash donation to Government, State Government or an approved charitable institution or organization and the claim must be substantiated with original receipts. There is no maximum limit for the donation.

RELIEF TYPES OF RELIEF LIMIT EXPLANATION Self RM9,000 Granted automatically and for disable taxpayer another RM6000 is allowed. Wife/husband (Joint assessment only) RM3,000 Granted automatically if wife/husband has no income and for disable wife/husband another RM500 is allowed Child Relief: Below 18 years 18 years and studying in an institution of higher Education Disable child RM1000 RM4,000 RM5,000 Unmarried child No restriction on the number of children. The wife is eligible to claim child relief if she is assessed separately

Contribution to EPF and Life Insurance Premiums (LIP) RM6,000 maximum Insurance policy secured on the life of the individual or spouse Medical Expenses for Parents RM5,000 maximum Receipt has to be certified by medical practitioner and the expenses can be claimed by more than one individual Purchase of supporting equipment for disabled self, spouse, child or parent. Claim must be supported by receipt

Full personal medical checkup RM500 maximum SSPN RM6,000 maximum Nett saving Personal computer RM3,000 maximum Every 3 years only Books and megazines RM1,000 maximum Annual Internet Fee

REBATES TYPES OF REBATE LIMIT EXPLANATION Self / personal rebate RM400 maximum. Taxpayer is entitled to the relief if chargeable income does not exceed RM35,000 Wife/husband rebate Eligible if the income of the wife/husband is assessed under joint assessment. Zakat/Fitrah rebate NIL Claims must be supported by receipt from Religious Authority.

TAX RATE SCHEDULE FOR PERSONAL INCOME Taxable Income (RM) Rate Tax (RM) On the first On the next 2,500 0% 1% 25 5,000 3% 150 10,000 175 300 20,000 15,000 7% 475 1,050 35,000 13% 1,525 1,950 50,000 19% 3,475 3,800 70,000 30,000 24% 7,275 7,200 100,000 150,000 27% 14,475 40,500 Excess over 250,000 28% 54,975

COMPUTATIONAL OF INCOME TAX Formula Total Income = Aggregate Income – Donation Total Relief = Self + spouse + Children + EPF + LIP + Parent Medical Chargeable Income = Total Income – Total Relief Amount of Tax = use Tax Rate Schedule to compute. Total Rebate = self + spouse + zakat + computer rebates Tax payable = Amount of Tax – Total Rebates

TWO TYPES OF ASSESSMENTS A) JOINT ASSESSMENT Only one assessment for both of them and their incomes must be combined. Whatever deduction claimed will be limited to the amount stated except for EPF + LIP (husband + wife) are limited to RM6,000 only. B) SEPARATE ASSESSMENT ( individual assessment ) Both husband and wife make their own assessment as a single person. In the case of children when wife is assessed separately, she may elect the appropriate deduction be allowed to her. If she so elects, relief in respect of the relevant child will be given fully to her. EPF + LIP are limited to RM6,000 to the husband and RM6,000 to the wife.

Example ( AL/OCT 2003/MAT112 – modified ) Zamri and his wife have 3 children below 18 years old. Their income for the year 2004 are as follows: Zamri Wife Monthly salary RM10,000 per month RM3,000 per month EPF monthly RM1,000 per month RM300 per month LIP monthly RM 20 - Approved donation RM5,000 Zakat RM2,000 RM50 Calculate their tax payable for the assessment year 2005 if they elect separate assessment.

Separate Assessment Zamri Total Income 120,000 Less deduction Self 8,000 Children 3 x RM 1,000 3,000 EPF + LIP 6,000 Approved donation 5,000 (22,000) Chargeable Income 98,000

Using tax schedule On the first RM70,000 7,275 On the next RM28,000 x 24% 6,720 Tax Amount 13,995 Less Rebate Zakat (2,000) Tax Payable 11,995

Wife Total Income 36,000 Less deduction Self 8,000 EPF + LIP 3,600 (11,600) Chargeable Income 24,400 On the first RM20,000 475 On the next RM4,400 x 7% 308 Tax Amount 783 Less Rebate Personal rebate 350 Zakat 50 (400) Tax Payable 383

Example ( CS/MAR 2005/MAT112 – modified ) En Harris has 5 children and his wife is a housewife. His eldest child is studying in UiTM while the rest are still schooling. His income and expenses for the year 2004 were as follows: RM Salary 48,000 EPF 5,280 LIP 1,000 Parent medical fees 2,000 Donations 500 Zakat 200 Calculate the tax payable for the assessment year 2005.

Joint Assessment En Harris and his wife Total Income (Husband + Wife) 48,000 Less deduction Self 8,000 Wife 3,000 Children 1x4,000 – University 4x1,000 – below 18 years old 4,000 EPF + LIP 6,000 Parent Medical Fees 2,000 Approved donation 500 (27,500) Chargeable Income 20,500

Using tax schedule On the first RM20,000 475 On the next RM500 x 7% 35 Tax Amount 510 Less Rebate Personal Rebate Wife Rebate 350 Zakat 200 (900) Tax Payable No tax payable for the assessment year 2005

Example A couple with 3 children aged below 18 years old had an annual income as follows Husband Wife Annual Salary 50,000 40,000 EPF (Employee Provident Fund) 5,000 4,000 LIP (Life Insurance Premium)) 1,500 1,200 Parent Medical Bill 300 6,000 Zakat 60 50 Computer - 3,500 Donation 100 Compute their tax liability if they choose Joint Assessment Separate Assessment

a) Joint Assessment on husband’s name TOTAL INCOME RM90,000 Self Relief RM8,000 Wife Relief RM3,000 Children Relief 3 x RM1,000 EPF + LIP (husband+wife) maximum RM6,000 Parent Medical Bill Husband only RM300 Donation RM100 (RM20,400) CHARGEABLE INCOME RM69,600 Tax On the first RM50,000 RM3,475 On the next RM19,600 x 19% RM3,724 TAX AMOUNT RM7,199 Rebates Zakat (RM50 + RM60) RM110 Computer RM500 (RM610) TAX PAYABLE RM6,589

b) Separate assessment - Husband TOTAL INCOME RM50,000 Self Relief RM8,000 Children Relief 3 x RM1,000 RM3,000 EPF + LIP (husband) maximum RM6,000 Parent Medical Bill RM300 (RM17,300) CHARGEABLE INCOME RM32,700 Tax On the first RM20,000 RM475 On the next RM12,700 x 7% RM889 TAX AMOUNT RM1,364 Rebates Self Rebates RM350 Zakat RM60 (RM410) TAX PAYABLE RM954

b) Separate assessment - Wife TOTAL INCOME RM40,000 Self Relief RM8,000 EPF + LIP ( RM4,000 + RM1,200) RM5,200 Donation RM100 Parent Medical Bill maximum RM5,000 (RM18,300) CHARGEABLE INCOME RM21,700 Tax On the first RM20,000 RM475 On the next RM1,700 x 7% RM119 TAX AMOUNT RM594 Rebates Self Rebates RM350 Computer RM500 Zakat RM50 (RM900) TAX PAYABLE RM0.00