With 30 April being the yearly deadline to file your taxes, we hope you were able to file yours on time. Whether you did your filing at the Internal Revenue Board (IRB) office, or chose the convenience of e-filing, as taxpayers we usually have the same question on our mind: “What are the easiest legal ways to claim tax relief”?
After reading this article, you will be able to identify “7 Easy Ways to Claim Tax Relief when Filing your Income Tax”.
1. Maximise your deductions for books, insurance and computers
In an effort to encourage the reading habit among Malaysians, the Government allows you to claim a tax relief of up to RM1,000 on book purchases. To make it easier to qualify for this exemption, even purchases of magazines are allowed. This includes electronic books purchased from Amazon.com or Apple Inc.’s Applestore. So, remember to save your receipts when you make that trip to the newsstand or bookstore.
If your Employees Provident Fund (EPF) yearly deduction does not reach RM6,000, then remember to top this up with your insurance payments. Your annual EPF deduction (added to your insurance payments) is tax exemptible up to RM6,000.
Have you purchased a new computer, tablet or iPad recently, specifically in the past three years? If yes, do not forget to claim for tax relief of up to RM3,000. Yes, many do not know that an iPad or tablet is considered a personal computer and qualifies for tax relief as long as it does not have a phone call or SMS feature. However, do take note that you are only allowed to claim for this once every three years.
2. Your child entitles you to RM1,000 of relief
If you have just started a family, remember to make an additional claim for deduction this year. This is because parents with children are entitled to ordinary child relief of RM1,000 per child. Best of all, this tax relief is applicable regardless of the number of children you have. In other words, the larger your family, the more child relief you can claim.
3. Take up a sport and save hundreds of Ringgit
If you like to indulge in sports, filing for tax relief via the purchase of sports equipment is indeed possible. A maximum tax relief of RM300 is allowed in respect of expenses for the purchase of sports equipment for any sports activity as defined under the Sports Development Act 1997, so make sure you keep the receipts as supporting documents.
Among the sports activities listed in the Sports Development Act 1997 and eligible for tax exemption include athletics, badminton, body building, canoeing, fencing, golf, recreational activities (?), sepak takraw, table tennis, water sports, and more.
However, take note that a gym membership and personal training session costs do not qualify for tax relief since they are not categorised as sports equipment.
4. File your taxes separately if you are married
If you and your spouse are income earners, consider filing your taxes separately. While it may seem like an extra step initially, the money you can save makes it worthwhile. This is because filing your taxes via a combined income (joint assessment) will push the chargeable income into a higher bracket, thereby also pushing you into a higher tax rate. When you file it separately, the effective tax rate is reduced.
5. Your parents can have it “maid”
Taxpayers can even claim deductions of up to RM5,000 (under medical expenses) for the hiring of a maid for their parents who are in need of special care. Of course, this comes with a condition: it has to be certified by a doctor that the parent actually needs special care.
6. Save your petrol allowance by travelling for official duty
For employees who are given a petrol allowance for travels made on official duty, you can claim a tax exemption of up to RM6,000 a year. Practise advanced planning by recording where you go every day, and for what purpose. As long as your travel is business-related, you can claim up to whatever you incur, provided it falls within your annual petrol allowance limit.
7. Declare your rental income and always keep proper records
Do you own some form of property that you rent out? If you do, always declare your rental income. Resist the temptation not to declare it, even if your rental income is actually less than your expenses. By not declaring your rental income, you will be taking a big risk, because if you rent the house to an expatriate, they will normally make a claim against their company, and companies are subject to tax audit.
This could present a huge problem. Supposing one day, an IRB officer audits your tenant’s claims against their company. Should the officer then decide to cross-check the claim for rent versus the landlord, they will notice that you have not declared your rental income. Even worse, if you failed to keep proper records, and if the IRB were to get hold of the tenancy agreement, you will have to explain why you did not declare your rental income. If all you have is a verbal explanation, you will get into big trouble.
Ultimately, you must always respect the law when filing your taxes. If you make a correct claim, you will just be paying your due tax. If you take the risk (of under-paying or under- declaring your taxes), and happen to get audited, there are severe penalties and you will probably have to spend months undoing the damage.
Assuming you qualify for tax relief, how much savings can you enjoy? It would depend on your effective tax rate. For example, if your tax rate is at 26% for every RM1,000, that is a savings of RM260. If you forget to claim RM10,000 worth of tax relief, you will burn RM2,600 in tax refunds.
Our advice is for you to build up your knowledge on tax information while being aware of the list of deductions and its conditions. Lastly, always keep your documentation in an easy to retrieve and organised manner, and never rely on your memory when it comes to filing your taxes!
Brought to you by Securities Industry Development Corporation (SIDC), the training and education arm of the Securities Commission Malaysia, as part of its ongoing efforts to create well-informed and savvy investors in the capital market. In addition, the SIDC reaches out to the general public to raise awareness on smart investing and money management through investor education seminars and workshops targeted at various segments of the community, such as schoolchildren, university students, parents, women as well as white and blue collar workers. Currently, we are conducting FREE “Kempen Pelabur Bijak Kebangsaan 2012-2013 (KPBK)” seminars across Malaysia.