chapter7-rebates n reliefs tax

8/3/2019 Chapter7-Rebates n Reliefs Tax

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Chapter 7

Relief and Rebates


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Learning Objectives

uJoint and Separate assessment

uTypes of relief

u

Types of rebatesu Computation of aggregate income;total income; chargeable income

u Computation of tax liability


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Learning Outcomes

At the end of the chapter, studentsshould be

able to know the following: Joint and Separate assessment Types of relief Types of rebates

Computation of aggregate income; totalincome; chargeable income

Computation of tax liability


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Introduction

u Relief and rebate would reduce theamount of income tax payable.

u Relief and rebate (if any) is deducted upon

reaching at total income

Total Income

Less: Relief

Chargeable income

Income tax payable (scaled rate)

Less: Rebate (if applicable)

Net income tax payable

RM

xxx

(xx)

Xxx

Xx

(xxx)

xxxx


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Relief

u Available only to an individual who is a taxresident in Malaysia in that particular YA

u The quantum of relief to each resident

individual varies according tocircumstances

u In the event the total relief exceeds thetotal income, the excess (unutilised relief)

cannot be carried forward to the followingYA.

The chargeable income is nil and no income taxis payable for that YA


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Relief

Types of relief

Personal relief - 9,000

Wife/husband relief for joint assessment

3,000

Disabled spouse 3,500

Alimony payments 3,000

RM


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Wife/husband Relief

u Entitled to a relief of RM3,000 if they electfor joint assessment under spouses name.

u No apportionment will be made if in the

particular BP, they cease to be livingtogether

u Maximum is RM3,000 regardless of thenumber of wives


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Wife relief

u Meaning of wife- refers to a woman who is regarded byvirtue of any law or custom as the wife of a man or asone of his wives.

u Meaning of living together It is not statutory defined Based on intention rather than geographical concept. Wife is presumed to live together with the husband

unless they are separated by a court order, deed ofseparation or where the separation is likely to bepermanent.


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Joint Assessment

u The wifes income is considered to be thehusbands income.

u The aggregate amount is assessed on the

husband.u The wife relief RM3,000 will be given to

the husband.

u Disabled wife- a further RM3,500 would begiven to the husband if the wife is notworking or elect joint assessment with thehusband.


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Alimony payment

u Max RM3,000 is given if the

husband: Made alimony payments to a wife Made alimony or maintenance payment

to a former wife Made payments in pursuance of a court

order, a deed to a maximum of RM3,000.


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Medical expense for parents

u Max RM5,000 is given for relief

u Should be evidenced by a receipt issuedby a medical practitioner certifying that

treatment was provided to the parents(not parents-in-law).

u Scope: includes normal medical expensesas well as to maintain the parents in

nursing home or the purchase of vitaminssupplement to the parents.

u Scope extended (wef2011) medicaltreatment, special needs, carer expenses*


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Medical Expense for parents

Shared medical expense

- Max RM5,000 will be given to each children as longas they can provide certified official receipt to thetax authorities during the tax audit (> a child

incurred medical expense)- If joint expense: apportionment between the

children based on the amount incurred

- Medical expenses bear the name parents-

endorsement on the receipts by medicalpractitioners certified that it has been paid by thechildren would be acceptable by tax authorities.


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Medical Expense for parents

u When the wife elects for joint assessment,under her husband, only the husband canobtain a deduction for medical expenses

incurred for his parents.u Medical expenses incurred on the wifes

parents would not be given any reliefagainst the husbands total income.


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Basic Supporting Equipment

u Max RM5,000 would be given to individualfor the purchase of nay necessary basicsupporting equipment for:

His/her own use (if he is disabledperson)

for the use of spouse, child, parent(who is a disabled person)


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Disabled Person

u Additional RM6,000 would be givento a disabled individual taxpayer.

u In addition to individual relief of

RM8,000u If income separately assessed, each

husband and wife who are disabled

can claim for this relief


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Course fees for self improvement

u Max RM5000 would be given to a residentindividual on fees expended in that basisyear for the purpose of acquiring

technical, vocational, industrial, scientificor technological skills or qualification inany institution in Malaysia recognised bythe Government.

u The subjects include accounting, Islamicfinance and all postgraduate studies.This is to encourage resident individual to take up any course of

study up to tertiary level in any institution or professional body inMalaysia recognised by the Government and approved by theminister


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Medical expenses

u A tax relief of up to RM5,000 a year will beallowed in respect of medical expensesincurred on the taxpayer or his spouse or

child who is suffering from a seriousdisease.

u To include RM500 expenses for a completemedical examination

u Receipt and certification by a medicalpractitioner is required for the claim.Scope of serious disease - AIDS, Parkinsons, Cancer,Renal failure, Leukemia, and Other similar diseases


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Reading materials

u Max RM1,000 on the purchase ofbooks, journals, magazines and othersimilar types of publication for the

purpose of enhancing knowledge forhis own use or for the use of spouseor child.

u Evidence receipt is required


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Personal computer

u max RM3,000 for acquisition of personalcomputer (evidence by receipt) onceevery 3 years

u Such relief is not applicable if: For the following two YAs Where the personal computer was

used for business.

If joint assessment, only tax payer can claim for personal computer relief.


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Skim Simpanan Pendidikan NasionalAccount

u Deduction up to RM3,000 those whohave deposited in SSPN account onown child education.

u Relief will be further reduced by anywithdrawal from the educationscheme during the year.


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Sport equipment

u Wef YA 2008 max RM300 is grantedon the purchase of sports equipmentfor any sports activities as defined

under the Sports Development Act1997.


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Broadband subscription fess

u Wef 2010, relief up to RM500 per

year

u Subscription must be under

taxpayers name


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Interest Expense on residentialproperty

u Wef 2009, limit to one unit, S&P agreement isexecuted on or after 10 March 2009 but not laterthan 31 Dec 2010

u no income is derived from the property

u Max RM10,000 for YA 2009 onwards beginningfrom the basis year in which the interest is firstincurred

u Where two or more are entitled for the claimapportion accordingly

u Joint assessment the amount expended by one,is deemed expended by the one who elect.


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Child relief s. 48(1)

u Maintenance of an unmarried child

(below 18 yrs old)u Maintenance of unmarried child who are

in school or attending higher learningeducation. Age is not importantu Maintenance of unmarried child who is

serving under articles or indentures

u Maintenance of physically or mentallydisabled child


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Child relief

u Definition of child: A legitimate child of the individual

or his wife A step child of an individual

(inclusive of his wifes) a child adopted by the individual

or his wife in accordance with anywritten law.


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Meaning unmarried child

u means never has been married or nothaving a husband at the time in question.

u Decided in the High Court in DGIR vs T(1974) Taxpayer claimed child relief on his

daughter who was receiving full timeuniversity instruction.

The marriage is a valid marriage. Sincethe court did not set aside the marriage,the daughter would remain as marriedchild and thus no relief is available tothe taxpayer.


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Quantum of child relief s 48(2)(a),(b)

u Max RM1,000 for each child

u Number of children qualifies for childis not restricted

u Disabled child is RM5000 (norestriction on the number of children)


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Childs higher education

u RM4,000 per child.

u Eligibility: Over 18 years old

Full time instruction at any university, college orother universities Serving under articles or indentures to be a

qualified in a trade or profession.

Disabled child, relief is increased to RM4,000 per child.The place of education can be in Malaysia or outsideMalaysia.


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Meaning of childs total income

u Includes all income that are legally due tothe childs in his own right and capacity.

u Where the child is working, receiving

income under a trust, and maintenancepaid by father under a deed of separation.


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Meaning of childs total income

u The following is not considered Childs TotalIncome

(a) A scholarship or a similar grant(b) Income settled on a child by the parents(c) Payment by childs employer which represents returns of a

premium paid for articles or apprenticeship.


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Where childs total income >allowable deduction

u Deduction is not allowed.

Amount of child relief

otherwise dueVS

Childs total income

Example:

If child relief due is 4 times namely RM4,000 and childs

total income is RM3,000 then full relief of RM4,000 wouldbe given to the claimant.


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Child relief ( summary)

Child Normal(RM)

(a) < 18 yrs

old

1,000 5,000

(b) > 18 yrs

old

- 5,000

(c) > 18 yrs old

- study fulltime in

university, college

4,000 4,000 + 5,000

YA 2006 - 2008

Disabled child(RM)


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Eligibility of claims

u Either spouse can make an election toclaim the child relief

u If the parents are separated or divorced

and both claim on the same child, therelief would be 50-50.


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Husband relief

u WEF YA 2006, provided that wherethe husband: has no source of income (not working)

has no total income to be jointlyassessed with the wife

has elected to jointly assessed with thewife

The wife will be entitled husband relief of RM3,000 + RM3,500(if husband is a disabled person)


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Deduction for insurance premiums,contribution to EPF or approved schemes

u Deduction of RM6,000 whichever is theless is allowed.

RMLife insurance premium

Amount contributed to EPF

3,300

4,800

Aggregate amount of payments and contributions is RM8,100.Thus, allowable deduction would be RM6,000


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Life assurance

Insurance and deferred annuity

contract must be made by theindividual:

u On his own life

u On the life of his wife or husband

u On the joint live of individual and a

wife or wives

u On her husband and any other

wife/wives of his


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Contribution to approved schemes.49(2)

u Contribution for EPF qualify for a relief

u Contribution should be an obligatory (byreason of any contract of employment etc)

u If contribution is partly obligatory andpartly non obligatory, thus portion ofobligatory will be allowed.

u Voluntary contributions even if made to an

approved scheme do not qualify for relief.


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Contribution to approved schemes.49(2)

u H & W who elects for joint assessmentRM6,000 whichever is the less will beavailable to the husband.

u RM6,000 (insurance + EPF contribution)


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Education or medical insurances.49(1B), s 49(4)

u If husband (for himself, wife or child)

u Entitled to claim for relief forRM3,000 (max) whichever is the

least.u If joint assessment, payment by wife

is deemed paid by the husband.

u max to be claimed is RM3,000.


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Rebate

u If chargeable income


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Religious payment

u Payment for zakat, zakat fitrah or otherIslamic religious dues payment of which isobligatory.

u Such obligation is paid in the basis year ofthat YA

u Must be evidenced by a receipt by anappropriate religious authority established

under any written law.


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References

u Malaysia Master Tax Guide 2010, 27thedition, CCH

u Veerinderjeet Singh (2005), MalaysianTaxation: Administrative and TechnicalAspects, Revised 6th Edition, PearsonLongman.

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