The GoBear Complete Guide to LHDN Income Tax Reliefs
If you’re a law-abiding citizen and in the midst of filing your LHDN taxes for 2019’s assessment, this guide is more important than ever. Yes, you’ve come to the right place – tax relief for your income taxes.
When you’re completing your tax returns, you are entitled to claim deductions for a number of expenses. Keep in mind however that you observe the following two conditions:
- You spent the money yourself and were not reimbursed
- You have kept proof of documentation on these expenses
Before we proceed, here’s what you need to know about the progressive income tax rates in Malaysia.
Remember that you are required to pay income taxes if you fit within the following criteria:
- Annual income above RM34.000 after EPF deductions
- Annual income above RM38,000 before EPF deductions
Want another reason why you should take a closer look at the table above? If you belong to the bracket with a chargeable maximum income of RM70,000, you will actually be paying less taxes compared to the year before.
So let’s jump in right now; the sooner you file them, the faster the IRB can process your tax rebates.
Save yourself some serious RM with your income tax reliefs!
The Bear would like to assure you that knowing all your income tax reliefs and maximising them – legitimately – is truly an achievement by itself. So the fact that you’re reading our blog, is absolutely deserving of a big pat on the back already!
We don’t want to just slap on the same attachment that you find from LHDN, so here’s a more in-depth look at all the tax reliefs that you can be entitled to for year of assessment 2018.
Don’t forget to read up on our Ultimate Guide to LHDN Personal Income Tax E-Filing too!
Before you jump ahead and read all our juicy tax details, we've also put together an easy infographic of the 10 most common tax reliefs for should keep an eye on.
Tax Relief for Resident Individuals
1. Self and Dependent – RM9,000
If this is your first time filing your e-taxes, then this item should bring a big smile to your face. You’ll enjoy a deduction of RM9,000 for yourself and your dependents. This is granted to you automatically and there’s nothing you need to do.
2. Medical expenses for parents OR Parent – RM5,000 (limited) or RM3,000 (limited)
The Bear does not want to guilt-trip you, but taking great care of your parents is a privilege; it’s a key virtue to many families – and also comes with a tax relief for us folks.
So if you’re responsible for taking care of your elderly parents – especially their medical needs – you can apply for a tax relief of up to RM5,000 from your annual income for both your parents.
Alternatively, if this medical expense tax relief isn’t claimed, you can apply for a tax deduction for parental expenses of up to RM1,500 for either your mother or your father.
3. Basic supporting equipment for disabled self, spouse, child or parent – RM6,000 (limited)
If you purchased supporting equipment to be used by any disabled member of the family such as your spouse, child, parent, or yourself, you may claim up to a maximum of RM6,000 a year.
Basic supporting equipment that falls under this tax reduction includes items such as haemodialysis machines, wheelchairs and other walking aids, prosthetic limbs, and hearing aids but excludes optical lenses and spectacles.
For example, if one of your parents were injured during an unfortunate hike and needed a wheelchair for a period of time during the year of assessment, you can claim for the purchase of the wheelchair.
4. Disabled individual – RM6,000
A disabled person (OKU) is entitled to receive an additional deduction of RM6,000.
On a sidenote, did you know that employers who hire disabled employees are also entitled to enjoy a tax deduction as well?
5. Education fees (self) – RM7,000 (limited)
Congratulations for going beyond your university degree – an education is easily one of the best gifts you can give yourself. You can apply for a tax relief of up to RM7,000 if you are supporting yourself in your pursuit of a Master’s or Doctorate-level degree. Your education fees will probably cost more, but at least this will be cushioned to a certain extent.
However, this is only applicable to studies that are not related to acquiring law, accounting, Islamic financing, technical, vocational, industrial, scientific, or technological skills or qualifications.
6. Medical expenses for serious diseases for self, spouse or child – RM6,000 (limited)
What is classified as a serious disease? This includes AIDS, Parkinson’s, cancer, renal failure, and leukaemia for a start. Other similar diseases include heart attack, pulmonary hypertension, chronic liver disease, fulminant viral hepatitis, head trauma with neurological deficit, brain tumour or vascular malformation, major burns, major organ transplant or the major amputation of limbs.
The tax relief for medical expenses expended on yourself, spouse or child of up to a maximum of RM6,000 is available when seeking treatment for such serious diseases.
7. Complete medical examination for self, spouse, child – RM500 (limited)
This tax relief needs to be considered in totality with the deduction above for serious diseases which comes up to a combined RM6,000. Undertaking a medical examination for yourself, your husband or wife, or child grants you a deduction of up to a maximum of RM500.
For instance, if you forked out RM5,700 for the medical treatment of your pulmonary hypertension condition in year of assessment 2018, you can only claim medical examination for a maximum of RM300 even if you had spent more than that.
8. Lifestyle – RM2,500 (limited)
This is one tax exemption that gives you back (some) moolah for the lifestyle that you lead – including your spouse and your children.
Do you subscribe for a business magazine? Yes, you can claim it. If your wife has a paid subscription to monthly editions of a health magazine, you’ll be able to file it in as well. Likewise, don’t forget your children’s Kuntum educational magazine as well. And that’s just for magazines and books.
Your brand spanking new computer, smartphone, or even tablet also falls under this lifestyle expense which you can claim a limited amount of exemption. Of course, none of your smart devices are optimised without a proper data plan and your monthly internet subscription is also included in this tax relief bracket.
Last but not least, your sporting gear for activities listed under the Sports Development Act 1997 as well as gym memberships are also entitled to enjoy a limited amount of exemption. Just don’t lump in your sports attire in here as your gym clothes do not qualify for relief.
Keep in mind that this is not a bottomless perk! You’ll enjoy a maximum of RM2,500 out of all the claims you insert. So if your shiny, new IPhone costs RM4,000 already, you’ll only be getting a relief of RM2,500 regardless of your other lifestyle expenses included.
9. Purchase of breastfeeding equipment – RM1,000 (limited)
Dearest mums, we have good news for you. The purchase of breastfeeding equipment to be used for a child aged two years old and below can save you a maximum of RM1,000 in tax exemption as announced during the tabling of Budget 2017.
According to the Income Tax Act 1967 Section 46 (1) (q) (a), breastfeeding equipment refers to a breast pump kit and an ice pack, a breast milk collection and storage equipment, and a cooler set or bag.
Note to remember: this deduction is allowed for a year of assessment immediately following that year of assessment. In other words, if you are making a claim now (for the year of assessment 2018), you can only make this claim again for the year of assessment of 2020.
10. Net saving in SSPN’s scheme (total deposit in year 2018 MINUS total withdrawal in year 2018) – RM6,000 (limited)
Another tax relief that will benefit families out there. Parents, guardians, and also legally adoptive parents who have SSPN-i accounts for their children will enjoy tax relief up to RM6,000 a year – on the net amount deposited.
In case you’re wondering, SSPN-i stands for Skim Simpanan Pendidikan Nasional and is a savings instrument by PTPTN for higher education purposes. This scheme is Syariah-compliant and follows the Wakalah Bil Istithmar concept where the depositors elect PTPTN to manage their deposits for investments.
11. Child care fees to a Child Care Centre or a Kindergarten – RM1,000 (limited)
The government does recognise the importance of childcare for working parents and the potential exorbitant costs involved. Hence, parents are able to take advantage of a maximum of RM1,000 in income tax relief when sending their children to childcare centres and kindergartens.
Do remember that the employment of maids and private nannies do not count towards this tax relief.
Such care centres and kindergartens must be registered with the state education department under the Ministry of Education.
Parents are also responsible in ensuring:
- An individual or company operating a childcare centre is registered with the Department of Social Welfare for at least five consecutive years of assessment beginning from:
- year of assessment 2013 for existing childcare centres
- first invoice issued by a childcare centre that commenced its business from year of assessment 2013
After all, everyone needs to play a part in ensuring the legitimacy and smooth implementation of regulations when looking after the little ones.
12. Husband/Wife/Alimony Payments – RM4,000 (limited)
According to the Department of Statistics Malaysia, the number of divorces improved by 3.2% from 51,642 cases in 2016 to 49,965 in 2017 – that’s still a lot of divorce cases.
If you (the ex-husband) has been paying your ex-wife last year, you can deduct up to RM4,000.
13. Disabled Wife/Husband – RM3,500
There is also an additional spousal relief of RM3,500 for your disabled wife or husband.
14. Ordinary child relief – RM2,000
You are allowed to claim RM2,000 a year for every child you have.
A child is defined as an unmarried dependent legitimate child or stepchild or adopted child. (Sorry animal lovers, fur kids don’t count!)
15. Each unmarried child of 18 years and above who is receiving full-time education (“A-Level”, certificate, matriculation or preparatory courses) – RM2,000
As an example, if you have two children currently studying full-time for their A-Levels or even Foundation year at a local university, then you’ll be entitled to claim a combined tax relief of RM4,000 for the year.
16. Each unmarried child of 18 years and above that is:
(i) receiving further education in Malaysia in respect of an award of diploma or higher (excluding matriculation/preparatory courses)
(ii) receiving further education outside Malaysia in respect of an award of degree or its equivalent (including Master or Doctorate)
(iii) the instruction and educational establishment shall be approved by the relevant government authority
If you have a child studying for a diploma or higher (Foundation years are not to be counted) within Malaysia, you can claim RM8,000. Likewise, for each child studying outside Malaysia for a degree or higher, you can also claim RM8,000 for the year.
17. Disabled child – RM6,000
For every physically or mentally disabled child in a household, one can claim RM6,000 a year regardless of age. Whereas there will be additional exemption of RM8,000 if the disabled child is aged 18 years old and above, unmarried and currently pursuing a higher education that is accredited by related government authorities.
18. Life insurance and EPF INCLUDING not through salary deduction – up to RM7,000 (limited)
Working adults who are making EPF contributions should pay attention to this tax relief item as you can claim up to a whopping RM4,000 for EPF and RM3,000 for life insurance or takaful.
In prior years of assessment, the tax relief was RM6,000 combined for both items. However, Budget 2019 made adjustments and separated them in a move to encourage more people to sign up for life insurance as protection.
19. Deferred Annuity and Private Retirement Scheme (PRS) – with effect from year assessment 2012 until year assessment 2021 – RM3,000 (limited)
To drive Malaysians to increase their savings for retirement, contributions paid to PRS funds approved by the Securities Commission can be used as a deduction when calculating the chargeable income of an individual.
Under subsection 49 (1D) of the Income Tax Act, a maximum of RM3,000 in a year of assessment is inclusive of premiums paid for deferred annuity. This tax deduction is effective for ten years from the year of assessment 2012 until 2021.
Here is an example when no deferred annuity premiums were paid:
|Year of assessment||2015||2016|
|Contribution to PRS fund (RM)||2,000||4,500|
|Allowable deduction (RM)||2,000||3,000|
20. Insurance premium for education or medical benefit INCLUDING not through salary deduction – RM3,000 (limited)
As medical expenses continue to escalate, many Malaysians are turning to some form of medical plan available in the market.
A relief not exceeding RM3,000 is available to taxpayers on insurance premiums paid in respect of education or medical benefits. This also extends to the taxpayer’s spouse or child.
21. Contribution to the Social Security Organization (SOCSO) – RM250 (limited)
A tidy sum not exceeding RM250 per year for all your monthly contributions to SOCSO in the year of assessment. You can refer to their official website for your contribution table and rates.
Remember, the deadline to e-file your IRB/LHDB personal income taxes is Wednesday, 15 May 2019. So make sure that you thoroughly look at the tax reliefs you are eligible for before submitting it online.
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