Tax Planning

16 TAX-SAVING MOVES

Posted on April 21, 2008. Filed under: Tax Planning |

While we are working so hard trying to accumulate our wealth, it becomes vital for us to minimise areas which will erode our cash reserves. Personal tax is one of the areas we have to look at.

I would like to share the following 16 tax-saving moves, which are legal and permitted by IRB:-

1) Save for your child’s education.

Any amount that is deposited into a savings account for your child under national Education Saving Scheme (Skim Simpanan Pendidikan Nasional) allows you to claim tax deduction. Tax deduction limited to RM3,000 per individual.

2) File separate tax returns

Separate assessment allow each spouse to claim personal tax relief of RM8,000 while a joint tax return allows one spouse to claim a wife or husband of RM3,000

3) Ask your employer to increase your EPF contributions

Contribution to the employees’ EPF by employers are tax-exempt to the employees. It is highly unlikely your employer will agree with that arrangement, so try to ask your employer to reduce your monthly salary but increase your EPF contribution by the same amount. For eg, if you reduce your salary by RM1,000 per month and have the same contributed into your EPF, you tax saving from your employment income would be the total reduction sum, ie. RM 12,000 X your tax rate.

4) Change your cash remuneration to cash reimbursement

Fixed allowances given by your employer each month for entertainment or housing are taxable at your tax bracket. Change this to a reimbursement based on receipt and your are not taxed on the amount received

5) Ask for a company car

A car given by your employer is regarded as a benefit in kind (BIK) and taxable. However, a company car is advantageous for tax payers because the present tax scale for cars is much lower than the actual cost of buying and maintaining a car

6) Make charitable contributions

Charitable contributions entitles you to a tax deduction for the amount given. Please take note that, from 2008 onward, this amount cannot exceed 7% of your aggregate income.

7) Take up postgraduate studies

A relief of RM5000 per year for any course of study at the master’s or doctorate level. The course does not have to be done full time, but must be in an institution or professional body in Malaysia recognised by the government.

8 ) Read more

You can claim up to RM1,000 for purchase of books, journals, magazines and other publications

9) Get sporty

You will get a deduction of RM300 for each year of assessment for the purchase of sports and exercise equipments

10) Buy life insurance

The maximum tax relief is RM6,000 a year for premiums paid to an insurance company for life or deferred annuity plans Please take note that this limit shared with your contributions to the EPF.

11) Take up a medical or education policy

You can claim deductions of up to RM3,000 a year for education and medical insurance

12) Pay your parents’ medical bills

You are able to claim up to RM5,000 for payments towards your parents’ medical bills

13) Medical

Claim a deduction up to RM500 per tax year for a full medical examination and RM5,000 for medical expenses for yourself, spouse or child for serious disease. A separate tax reduction of up to RM5,000 a year is given for necessary basic supporting equipment for disabilities suffered by yourself, spouse, children or parent

14) Pay Zakat

If you are a muslim, paying any amount in zakat, fitrah or other obligation Islamic dues will entitle you to a tax rebate for the amount that you pay.

15) Buy a computer

A deduction of up to RM3,000 can be claimed once every three years for the purchase of computers, printers and bundled software

16) Hire a Tax consultant

Consider hiring a tax consultant to explore ways your remuneration package can be structured to maximise your tax savings. I suppose this is justifiable only to those higher income earners.

If you diligently do your tax planning, you will be surprised how much you could save at the end of the day!

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