Tax Relief Archives - iBanding Making better decisions

How to Maximize Your Income Tax Relief and Save Money

luke — Thu, 21 Dec 2017 07:54:15 +0000

It’s the most wonderful time of the financial year as we draw it to a close. One of the many things ending this month is your income tax 2017 eligibility period. I am sure many of you are aware of the various reliefs and rebates offered by our generous government so that we can claim back a (tiny) portion of our hard earned money.

And of these reliefs that can be claimed, none is as hefty as the amount spent on insurance premiums, which is what I will be focusing on. Aside from getting the comprehensive coverage when purchasing medical or life insurance, which should be sufficient enough reason to buy, you will also be able to enjoy the tax relief benefits.

Under the Malaysian Income Tax Act 1967, these incentives are given to encourage each Malaysian citizen to own some form of protection, so we can be prepared when the unexpected does happen. Also, I think this is so we don’t over burden the government hospitals and drain their resources when we fall sick. From the official website of the Inland Revenue Board of Malaysia, here are the reliefs as listed;

Premiums on life insurance and EPF which is up to RM6,000

Note that this is lumped together with your EPF contributions. Not sure how much of your policy is conside red the life portion? Fret not, as your insurer will provide you with a statement for tax relief purposes which lists the breakdown into each category. So for this relief, the description is usually written as “LIFE”. Haven’t received it yet? Check with your agent or insurer.

Premiums on children education or medical benefits which is up to RM3,000

Scenario 1: Assured: Parent, Beneficiary: Child
Under child education, the beneficiary has to be the child if the parent is the assured, meaning the child has to be the nominee. Also the maturity payout must be between the ages of 14 to 25 years of age.

Scenario 2: Assured: Child, Beneficiary: Child, Policy owner: Parent
Alternatively, the assured can be the child if the parents are the policy owner and a payor benefit is included. Again, the maturity payout is between ages 14 to 25 years.

In terms of medical policies, there are several criteria as well to fulfill. Firstly, it must be in force for over a year. Any expenses that are related to medical treatment (accident/ illness/ disability) are considered claimable. Hence, only your medical card qualifies and not any lump sum payment of critical illness and TPD. If it is a standalone policy the entire amounts is deductible, but if it is attached as a rider, please check the statement from your insurer on the exact amount to input.

Annualized premium vs actual premium paid

Sometimes, your annualized premium would be around RM 3,000 but upon receiving your premium statement the following year, you get a shock and wonder why only RM1,500 is deductible? Simple, the tax deduction is based on the actual premiums paid for that particular year, hence for this case, seem like the policy was taken up mid-way through the year.

So if you maxed out both your insurance reliefs, amounting to RM9,000, get ready for a sizable refund of the taxes you have already paid from LHDN sometime next year. But what if you haven’t yet? No worries. There is still time till 31 December 2017 for you to qualify for these reliefs next year.

Contact us

If you would like to get insurance advice, contact us with above form, so we can follow up. Do bear in mind that you need to make a full annual payment to really maximize your tax reliefs before year closes out. So put that Christmas/year-end bonus to good use!

Happy holidays!

Author: Samuel Raj Dhairianathan

Samuel is a former Medical BioScience graduate from Monash University. He holds several prestigious titles to his name such as FLMI, ACS, and ARA.

Samuel possesses a decade of insurance experience as an Underwriter with AIA, Singapore as well as a substantial experience in the Customer Experience department. Eventually, he pursued a career as a Registered Financial Planner.

Read more about Samuel in our interview with him.

The post How to Maximize Your Income Tax Relief and Save Money appeared first on iBanding Making better decisions.

Tax Relief Malaysia – Want To Maximise Tax Relief With Your Medical Insurance? Read This!

luke — Thu, 07 Sep 2017 06:20:10 +0000

Every year the working Malaysians scramble to file their personal income tax by April. Although we have passed the due date months ago, this can be useful to prepare for the assessment year 2017.

What is tax relief?

Tax relief in Malaysia is issued by the Inland Revenue Board of Malaysia (IRBM). It helps taxpayers, to reduce a certain amount of money spent on necessities in a particular year —from your total annual income.

The tax reliefs that you can claim ranges from the purchase of books, magazines, journals, sports equipment, insurance premium for education or medical benefit, housing loan interests, and much more.

But did you know that you can also enjoy tax relief for your medical insurance premium? Every year, as a resident in Malaysia you can claim up to a maximum of RM 3,000 under the education and medical insurance tax relief quota.

Here are 3 ways you can maximize tax relief with your medical insurance.

1. Claim 60% of your life insurance premium under medical insurance tax relief

In case you didn’t know, there are two types of tax relief that you can take advantage of. They are the EPF and life insurance tax relief, and the education and medical insurance tax relief. Each has different limits.

Individual Tax Relief Limit

EPF and life Insurance: RM 6,000
Education and Medical Insurance: RM 3,000

But how and when can you maximize the education and medical insurance quota? Let’s assume a scenario with the amount below:

EPF contribution: RM 6,000
Medical insurance premium: RM 2,500
Life Insurance plus rider premium: RM 1,000

Here as you can see, your EPF contribution has already maxed out the RM 6,000 limit leaving you no room to claim for your life insurance.

But not to worry. 60% of your life insurance premium is claimable under the education and medical insurance limit of RM 3,000.

First, you can include your medical insurance premium (RM 2,500) under education and medical insurance limit. You then take your life insurance premium (60% x RM 1,000 = RM 600).

And in total you would have RM 2,500 + RM 600 = RM 3,100. But since the limit is only RM 3,000, you can only claim up to RM 3,000 instead of RM3,100. This way you are maximising your medical insurance tax relief—fully.

2. Joint assessment tax relief vs separate assessment

This second point is more relevant to a married couple. According to section 45 of the Income Tax Act 1967, all individuals including a married person is considered as separate individuals— unless they choose otherwise.

Knowing whether to opt for a joint assessment or a separate assessment can affect your medical insurance relief limit.

When is a separate assessment beneficial?

A separate assessment is very beneficial for married couples who both draw high salaries.

Their combined income can result in a higher chargeable income which can be subject to a higher income tax bracket. Therefore claiming tax relief separately including medical insurance tax relief is best for this type of couple.

Scenario 1: Husband and wife opt for separate assessment.

Example: Husband and wife are both earning high salary

If Hakim paid RM3,000 a year for his medical insurance and his wife paid RM 3,000 per year, they each have a limit of up to RM 3,000.

When is a joint assessment beneficial?

It’s a reverse situation for cases of the following type of couple. A joint assessment is beneficial for married couples where for example a husband is the higher income earner and the wife earns lesser to no income at all.

In this case, the husband is allowed to claim for medical insurance spouse relief of up to RM 3,000.

Scenario 2: Husband and wife opt for joint assessment.

Example: Husband earns higher income and wife earns lower or no income

If Ragu pays RM 1,800 a year for his medical insurance and his wife’s medical insurance is RM 1,200, Ragu can maximize his medical insurance tax relief by adding both his premium together with his wife’s.

3. Save More with Your Medical Insurance

If you already have a medical insurance aside from your company’s group medical insurance, that’s great.

The reason behind this is because the group medical insurance provided to you is paid by your company. Therefore it’s not considered as your personal expense. What is considered as your personal expense is when you have to pay for a certain thing yourself.

In this case, having a medical insurance which you have to pay premiums by yourself, is considered a personal expense. Let’s look at how much you can save when you have a personal medical insurance.

Medical Insurance Premium (per year): RM 1000

Tax Rate: 26%*

*example is assuming the highest tax rate, which will depend on your salary range.

In actuality, you stand to pay only RM 740 (RM 1,000 x 26%) a year instead of RM 1,000. You can save RM 260 in medical insurance premium alone.

Tax Relief for Resident Individual 2017 – Malaysia Source: Inland Revenue Board Of Malaysia

Was this useful to you? Did it help you with your tax relief or with any tax relief problems? If so tell us what you think in the comment box below. And if you feel that this is an information worth sharing with your friends and family, go ahead and spread the word.

The post Tax Relief Malaysia – Want To Maximise Tax Relief With Your Medical Insurance? Read This! appeared first on iBanding Making better decisions.