IT is already going to be December and usually this is the time where financial professionals would be going through their client’s tax planning and remind clients on what they can do to reduce their tax liabilities – LEGALLY!
Let us take an example of someone with an income of RM140,000 per year ,assuming the person has children and only does this for tax submission:
Individual relief: RM9,000
Lifestyle: RM2,500
Child care fees: RM2,000
Child under 18 years: RM2,000
Life insurance: RM3,000
Employees Provident Fund (EPF): RM4,000
Medical insurance: RM3,000
Social Security Organisation (SOCSO): RM350
Total relief = RM25,850
Therefore, the chargeable income is RM 114,150 with an income tax bracket of 24% and total tax payable (liability) of RM14,296.
However, this could be further optimised on top of the total of RM25,850 as stated above by having the following tax reliefs that an individual is entitled to:
- COVID-19 test kit expenses: RM1,000 (applicable for YA 2021 and 2022)
- Additional Lifestyle expenses: RM2,500
- Skim Simpanan Pendidikan Nasional (SSPN): RM8,000
- Private Retirement Scheme (PRS): RM3,000
- Domestic travel expenses: RM1,000 (applicable for YA 2021 and 2022)
- Total relief = RM41,350
Chargeable income is now RM98,650 with a LOWER income tax bracket of 21% and total tax payable (liability) is RM6,017.
RM14,296 vs RM6,017 is RM3,880 in tax savings!
Unless you would like to contribute more to tax, this is one way to LEGALLY optimise your personal income tax savings. Kindly engage your tax accountant or a licensed finance professional for more assistance on tax planning.
One of the ways mentioned above is to invest in a PRS that allows you a max of RM3,000 in tax relief. Another bonus is that if you SELECT the CORRECT fund, you may be able to accelerate the capital appreciation for your retirement funding.
If you do need help on PRS investment, first and foremost please assess and understand your risk appetite and UNDERSTAND the fund via means of the fund factsheet and research by independent investment researchers. Finally, do consult a financial planner. – Nov 13, 2022
Rozanna Rashid, CFP, IFP is a director and licensed financial planner with Alpine Advisory Sdn Bhd. She is also a certified member of Financial Planning Association of Malaysia (FPAM).
The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.
Main photo credit: The Star
