Chapter 7

Relief and Rebates

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Learning Objectives
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Joint and Separate assessment Types of relief Types of rebates Computation of aggregate income; total income; chargeable income Computation of tax liability

Learning Outcomes
At the end of the chapter, students should be able to know the following:

Joint and Separate assessment Types of relief Types of rebates Computation of aggregate income; total income; chargeable income Computation of tax liability

Introduction
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Relief and rebate would reduce the amount of income tax payable. Relief and rebate (if any) is deducted upon reaching at total income
RM xxx (xx) Xxx Xx (xxx) xxxx

Total Income Less: Relief Chargeable income Income tax payable (scaled rate) Less: Rebate (if applicable) Net income tax payable

Relief
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Available only to an individual who is a tax resident in Malaysia in that particular YA The quantum of relief to each resident individual varies according to circumstances In the event the total relief exceeds the total income, the excess (unutilised relief) cannot be carried forward to the following YA.

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

Relief
Types of relief Personal relief Wife/husband relief for joint assessment Disabled spouse Alimony payments
RM

9,000 3,000 3,500 3,000

Wife/husband Relief
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Entitled to a relief of RM3,000 if they elect for joint assessment under spouses name. No apportionment will be made if in the particular BP, they cease to be living together Maximum is RM3,000 regardless of the number of wives

Wife relief
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Meaning of wife- refers to a woman who is regarded by virtue of any law or custom as the wife of a man or as one of his wives. 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 of separation or where the separation is likely to be permanent.

Joint Assessment
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The wifes income is considered to be the husbands income. The aggregate amount is assessed on the husband. The wife relief RM3,000 will be given to the husband. Disabled wife- a further RM3,500 would be given to the husband if the wife is not working or elect joint assessment with the husband.

Alimony payment
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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.

Medical expense for parents

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Max RM5,000 is given for relief Should be evidenced by a receipt issued by a medical practitioner certifying that treatment was provided to the parents (not parents-in-law). Scope: includes normal medical expenses as well as to maintain the parents in nursing home or the purchase of vitamins supplement to the parents. Scope extended (wef2011) medical treatment, special needs, carer expenses*

Medical Expense for parents

Shared medical expense - Max RM5,000 will be given to each children as long as they can provide certified official receipt to the tax 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 parentsendorsement on the receipts by medical practitioners certified that it has been paid by the children would be acceptable by tax authorities.

Medical Expense for parents

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When the wife elects for joint assessment, under her husband, only the husband can obtain a deduction for medical expenses incurred for his parents. Medical expenses incurred on the wifes parents would not be given any relief against the husbands total income.

Basic Supporting Equipment

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Max RM5,000 would be given to individual for the purchase of nay necessary basic supporting equipment for: His/her own use (if he is disabled person) for the use of spouse, child, parent (who is a disabled person)

Disabled Person
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Additional RM6,000 would be given to a disabled individual taxpayer. In addition to individual relief of RM8,000 If income separately assessed, each husband and wife who are disabled can claim for this relief

Course fees for self improvement

Max RM5000 would be given to a resident individual on fees expended in that basis year for the purpose of acquiring technical, vocational, industrial, scientific or technological skills or qualification in any institution in Malaysia recognised by the Government. u The subjects include accounting, Islamic finance and all postgraduate studies. This is to encourage resident individual to take up any course of
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study up to tertiary level in any institution or professional body in Malaysia recognised by the Government and approved by the minister

Medical expenses
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A tax relief of up to RM5,000 a year will be allowed in respect of medical expenses incurred on the taxpayer or his spouse or child who is suffering from a serious disease. To include RM500 expenses for a complete medical examination Receipt and certification by a medical practitioner is required for the claim. Scope of serious disease - AIDS, Parkinsons, Cancer,
Renal failure, Leukemia, and Other similar diseases

Reading materials
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Max RM1,000 on the purchase of books, journals, magazines and other similar types of publication for the purpose of enhancing knowledge for his own use or for the use of spouse or child. Evidence receipt is required

Personal computer
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max RM3,000 for acquisition of personal computer (evidence by receipt) once every 3 years 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.

Skim Simpanan Pendidikan Nasional Account

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Deduction up to RM3,000 those who have deposited in SSPN account on own child education. Relief will be further reduced by any withdrawal from the education scheme during the year.

Sport equipment
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Wef YA 2008 max RM300 is granted on the purchase of sports equipment for any sports activities as defined under the Sports Development Act 1997.

Broadband subscription fess

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Wef 2010, relief up to RM500 per year Subscription must be under taxpayers name

Interest Expense on residential property

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Wef 2009, limit to one unit, S&P agreement is executed on or after 10 March 2009 but not later than 31 Dec 2010 no income is derived from the property Max RM10,000 for YA 2009 onwards beginning from the basis year in which the interest is first incurred Where two or more are entitled for the claim apportion accordingly Joint assessment the amount expended by one, is deemed expended by the one who elect.

Child relief s. 48(1)

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Maintenance of an unmarried child (below 18 yrs old) Maintenance of unmarried child who are in school or attending higher learning education. Age is not important Maintenance of unmarried child who is serving under articles or indentures Maintenance of physically or mentally disabled child

Child relief
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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 any written law.

Meaning unmarried child

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means never has been married or not having a husband at the time in question. Decided in the High Court in DGIR vs T (1974) Taxpayer claimed child relief on his daughter who was receiving full time university instruction. The marriage is a valid marriage. Since the court did not set aside the marriage, the daughter would remain as married child and thus no relief is available to the taxpayer.

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

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Max RM1,000 for each child Number of children qualifies for child is not restricted Disabled child is RM5000 (no restriction on the number of children)

Childs higher education

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RM4,000 per child. Eligibility: Over 18 years old Full time instruction at any university, college or other 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 outside Malaysia.

Meaning of childs total income

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Includes all income that are legally due to the childs in his own right and capacity. Where the child is working, receiving income under a trust, and maintenance paid by father under a deed of separation.

Meaning of childs total income

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The following is not considered Childs Total Income

A scholarship or a similar grant Income settled on a child by the parents Payment by childs employer which represents returns of a premium paid for articles or apprenticeship.

(a) (b) (c)

Where childs total income > allowable deduction

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Deduction is not allowed.

Amount of child relief otherwise due VS 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 would be given to the claimant.

Child relief ( summary)

YA 2006 - 2008 Child (a) < 18 yrs old (b) > 18 yrs old (c) > 18 yrs old - study fulltime in university, college Normal (RM) 1,000 Disabled child (RM) 5,000 5,000

4,000

4,000 + 5,000

Eligibility of claims
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Either spouse can make an election to claim the child relief If the parents are separated or divorced and both claim on the same child, the relief would be 50-50.

Husband relief
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WEF YA 2006, provided that where the husband:

has no source of income (not working) has no total income to be jointly assessed with the wife has elected to jointly assessed with the wife

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

Deduction for insurance premiums, contribution to EPF or approved schemes

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Deduction of RM6,000 whichever is the less is allowed. RM

Life 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

Life assurance
Insurance and deferred annuity contract must be made by the individual: 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

Contribution to approved scheme s.49(2)

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Contribution for EPF qualify for a relief Contribution should be an obligatory (by reason of any contract of employment etc) If contribution is partly obligatory and partly non obligatory, thus portion of obligatory will be allowed. Voluntary contributions even if made to an approved scheme do not qualify for relief.

Contribution to approved scheme s.49(2)

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H & W who elects for joint assessment RM6,000 whichever is the less will be available to the husband. RM6,000 (insurance + EPF contribution)

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

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If husband (for himself, wife or child) Entitled to claim for relief for RM3,000 (max) whichever is the least. If joint assessment, payment by wife is deemed paid by the husband. max to be claimed is RM3,000.

Rebate
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If chargeable income <= RM35,000, a rebate of RM400 will be granted. Also available to a wife under separate assessment. Under joint assessment, RM800

Religious payment
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Payment for zakat, zakat fitrah or other Islamic religious dues payment of which is obligatory. Such obligation is paid in the basis year of that YA Must be evidenced by a receipt by an appropriate religious authority established under any written law.

References
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Malaysia Master Tax Guide 2010, 27th edition, CCH Veerinderjeet Singh (2005), Malaysian Taxation: Administrative and Technical Aspects, Revised 6th Edition, Pearson Longman.