Income tax is a tax imposed each year on individuals who receive income of a revenue nature such as:
The Income Tax Act 1967 (ITA) enforces administration and collection of income tax on persons and taxable income.
The Inland Revenue Board of Malaysia (IRBM) is one of the main revenue collecting agencies of the Ministry of Finance.
Income tax shall be charged for each year of assessment upon the income of any person accruing in or derived from Malaysia or received in Malaysia from outside Malaysia
An individual whose total taxable income EXCEEDS the threshold value must register for an income tax file.
The scope of taxation for an individual depends on their residency status.
Resident individuals are taxed according to tax rates and are eligible for tax reliefs in accordance with section 45A to 49 of the Income Tax Act 1967. Meanwhile, non-resident individuals are taxed at a flat rate of 30% and are not eligible to enjoy any reliefs.
Any source of income derived from outside Malaysia and received in Malaysia is tax exempted.
Individuals who receive annual employment income exceeding RM37,333 and those subject to Monthly Tax Deductions (MTD) are eligible to be taxed
The calculation of individual threshold of non taxable income is taking into account after the deduction of annual gross income with eligible individual reliefs and tax rebates.The basic individual reliefs may include individuals and his dependent relatives dependents as well as husband / wife and children (under the age of 18 years old) for married individuals, whilst the individual rebate (RM400) and spouse (RM400 – if applicable) is allowed if the individual’s taxable income is not more than RM35,000.
Below is the threshold of an individual's NON TAXABLE income according to the type of assessment:
| Type Of Assessment | Annual Income (RM) | Monthly Income (RM) |
|---|---|---|
| Self (Single / Widower/ Divorcee / Spouse with no source of Income) | 37,333 | 3,111 |
| Separately | ||
| 1. Married with no Child | 37,333 | 3,111 |
| 2. Married with 1 Child | ||
| 3. Married with 2 Children | 41,333 | 3,444 |
| Joint | ||
| 1. Married with no Child | 48,000 | 4,000 |
| 2. Married with 1 Child | 50,000 | 4,167 |
| 3. Married with 2 Children | 52,000 | 4,333 |
Notes:
Gains or profits from carrying on a business, trade, vocation, or profession are liable to tax (inclusive of Shadow Economy businesses)
Business includes:
Examples of Business :
Self Assessment System (SAS) is based on the concept of Pay, Self Assess and File.
Self assessment means that taxpayer is required by law to determine his taxable income, compute chargeable income tax, submit the income tax return form and make tax payment for the year of assessment concerned.
Notice of assessment wil not be issued under SAS as the ITRF submission itself is the final assessment notice.
Below are type of forms used to declare income
The residency status of individuals is subject to Section 7, Income Tax Act 1967.
Monthly Tax Deduction (MTD) as Final Tax has been enforced starting from the Year Assessment of 2014 whereby individuals with employment income and (MTD) have the option not to furnish ITRF to IBRM.
Requirements:
