Minimum Income to Pay Income Tax in Malaysia

Summary

This video explains how to calculate the minimum salary required to avoid paying income tax in Malaysia. It covers tax rebates for chargeable income under RM35,000, detailing how rebates reduce tax liabilities. The video also highlights personal reliefs such as EPF contributions, life insurance, and lifestyle deductions, demonstrating their impact on reducing taxable income. Through examples, viewers learn how to plan their spending and salary adjustments to maximize tax savings. The key takeaway is the importance of pre-year-end planning to utilize available tax reliefs and minimize taxes.

Takeaways

• 😀 Tax rebates are available for chargeable incomes not exceeding RM 35,000, providing a reduction in the amount of tax owed.
• 😀 A RM 408 tax rebate is applied if your chargeable income is below RM 35,000, effectively reducing your tax burden.
• 😀 If your chargeable income is exactly RM 35,000, your tax will be RM 600, but after applying the rebate, you only owe RM 200.
• 😀 You can work backwards from the tax rebate to estimate the income at which you'll owe no taxes, which is approximately RM 28,333 in chargeable income.
• 😀 Personal reliefs such as EPF deductions, life insurance, and broadband costs can reduce your taxable income, making it easier to avoid paying taxes.
• 😀 Every resident individual in Malaysia is given a personal relief of RM 9,000, and additional reliefs may apply depending on lifestyle and spending.
• 😀 Tax planning should be done before the end of the year to maximize available reliefs and rebates to minimize tax liabilities.
• 😀 If your salary increases (e.g., a 5% raise), you may exceed the RM 35,000 threshold and lose the RM 408 rebate, increasing your tax liability.
• 😀 For a gross salary of RM 3,519 per month, after reliefs, you will have zero tax to pay.
• 😀 It is advisable to plan purchases of deductible items like laptops or insurance before the year ends to maximize tax relief and avoid unnecessary taxes.
• 😀 Understanding your chargeable income and tax liabilities early in the year can help you optimize your income and avoid surprises during tax filing.

Q & A

What is the tax rebate available for individuals with a chargeable income of 35,000 Ringgit or less in Malaysia?

Individuals with a chargeable income of 35,000 Ringgit or less in Malaysia are eligible for a tax rebate of 408 Ringgit, which reduces the amount of tax they need to pay.

How does the tax rebate work in relation to the chargeable income of 35,000 Ringgit?

If your chargeable income is exactly 35,000 Ringgit, your tax amount is 600 Ringgit. With the 408 Ringgit rebate, you only need to pay 200 Ringgit in taxes.

What is the 'chargeable income' and how is it calculated in the context of income tax in Malaysia?

Chargeable income refers to the income subject to tax after personal reliefs and deductions have been applied. It is calculated by subtracting allowable deductions from your total income.

How do tax rebates affect the amount of tax an individual has to pay?

Tax rebates reduce the total amount of tax an individual needs to pay. For example, if your tax liability is 600 Ringgit and you have a rebate of 408 Ringgit, you only need to pay 200 Ringgit in tax.

What personal reliefs can an individual claim to reduce their taxable income?

Personal reliefs include EPF contributions, life insurance, and lifestyle-related expenses like broadband. A standard personal relief of 9,000 Ringgit is given to residents, with additional reliefs for specific expenses.

How does an increase in salary affect the tax an individual has to pay?

An increase in salary may push the individual’s chargeable income above certain thresholds, reducing or eliminating the tax rebate and potentially increasing the tax payable. For example, with a salary increase to 4,100 Ringgit per month, the individual may have to pay 65 Ringgit in tax.

What happens if an individual’s chargeable income exceeds 35,000 Ringgit?

If an individual's chargeable income exceeds 35,000 Ringgit, the tax rebate of 408 Ringgit is no longer applicable, and they will have to pay tax on the full amount of their chargeable income.

What can individuals do to minimize their income tax liability before the end of the year?

Individuals can plan their spending on deductible items like laptops, sports equipment, or insurance, and claim relevant tax reliefs to reduce their taxable income before submitting their tax return.

Is the tax rebate the same for everyone in Malaysia?

No, the tax rebate is generally available for individuals with chargeable income not exceeding 35,000 Ringgit. However, the amount of relief a person can claim depends on their specific personal and lifestyle deductions.

How does an individual's lifestyle spending impact their income tax in Malaysia?

Lifestyle spending, such as broadband expenses, can qualify for additional reliefs, which in turn reduces the individual's chargeable income and potentially lowers their overall tax liability.