Tax Rate

Let's learn something about income tax. Below show the income tax rate for assessment year 2016:

Source from: http://www.hasil.gov.my/bt_goindex.php?bt_kump=5&bt_skum=1&bt_posi=2&bt_unit=5000&bt_sequ=11

How should we analyse this table? Actually we can see them by section. Check the following table:

What does it mean? The first RM 5,000 that you earned (chargeable income) that year will be tax free! After that, the next RM 15,000 that you earned, each ringgit will be charged with 1% tax. Following that, the next RM 15,000 again you will be charged with 5% tax and so on.

Say you have a chargeable annual income of RM 36,000 that assessment year. The first RM 5,000 is tax free, next RM 15,000 is 1%, next RM 15,000 is 5%, and the final RM 1,000 is 10%, giving a total of RM 1,000 that you have to pay for income tax.

Do check out what item can deduct your chargeable income, as after you jump to another tax bracket, each extra ringgit is going to be charged with higher tax rate. As the scenario above, the first RM 35,000 is only charged with RM 900 tax but the final RM 1,000 alone you are paying RM 100 tax. It is up to you to keep the RM 900 and pay the RM 100 tax; OR you can use that RM 1,000 fully on tax relief items and do not need to pay that RM 100 tax.

The tax relief can be seen as an initiative for the government to promote spending on certain area/sector. Do use it wisely to maximise your gain on monetary or non-monetary portion. However, do keep a nice filing for all the receipts for the tax relief items as you could be penalised for not able to show proof when they do auditing on your tax submission.

Be smart with your money. ^_^