Income Tax

Reminder: This topic is only covered in MAT402.

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Introduction

This chapter deals with the concepts of income tax. However, for this course we will only cover on the topic of personal income tax. By the end of this chapter, student should be able to:

1. identify allowance deductions for income tax purposes,
   
2. determine chargeable income,
   
3. use the tax schedule to determine the tax amount,
   
4. recognize that tax rebate is allowed for a chargeable income of less than RM35,000 and that zakat is an allowable rebate, and
   
5. calculate tax payable.

Reference - Official LHDN Website

Type of Assessment

Income tax is the normal tax which is paid on your taxable (chargeable) income.

Two types of Assessment:

1. Separate Assessment, such that:
   1. Tax is calculated individually. For instance : bachelor, husband only, wife only.
      
   2. Husband the only one working (wife get relief and rebate).
      
   3. Children are assessed under husband unless it is requested by wife.
2. Joint Assessment, such that:
   1. Tax is calculated together. For instance : husband + wife.
      
   2. For Parents Medical Expenses, only husband part is calculated.

How to calculate tax payable amount?

To calculate tax payable amount, there are 5 steps:

1. Aggregate Income

• Annual Income (the salary for 12 months)
  
• For joint assessment, the aggregate income must be the combination income of husband and wife.

2. Donation

Donation & Gift

3. Reliefs

Tax Relief

4. Taxable Income (Chargeable Income)

Tax Rate

5. Rebates

Rebates

No.	Tax Rebates	Amount (RM)
1.	Husband (Taxable income below RM35,000)	400
2.	Wife (Taxable income below RM35,000)	400
3.	Zakat	No Limit

Solved Examples

A couple with three children aged between 13 and 22 years old had a combined annual income of RM114,000 for the 2021 assessment year. The youngest daughter is studying in a secondary school and the rest are studying at a local university doing their diploma and bachelor’s degree. Their expenses (in RM) for the year 2021 are as follows:

	Husband	Wife
Income	75,000	39,000
EPF Contributions	9400	5500
Life Insurance Premium	1870	1390
Parents Medical Bills	2000
Zakat	3000	2400
Donations	700	500
SSPN	2100	1200

Tax assessment for individual who is single

Tax assessment for individual who is married

Separate Assessment

Joint Assessment