It is better to plan early to reduce our income tax payable, rather than wait till the last minute. In this tax planning guide, we are going to look at personal tax reliefs available for YA2024 (Click here for YA2023 tax reliefs). This applies to expenses incurred in year 2024 and the tax return will be filed in 2025. There are only minor changes to the tax reliefs compared to YA2023 (new changes are highlighted in red in the diagram below).
Tax reliefs
The diagram above shows the personal tax reliefs available to be claimed. I will only touch on a few points here and exclude most of the tax reliefs for consumption or only available to selected groups. The fixed tax relief of RM 9,000 given to every taxpayer is automatically deducted.
Investment
Employees Provident Fund (EPF):
Contributions to EPF up to RM 4,000 is entitled to tax relief. It means that you can contribute up to RM 4,000 to claim the maximum amount of tax relief. Any money over the limit is not deductible. The main drawback of EPF is its withdrawal restrictions. However, EPF will introduce a flexible account in 2024 and we might be able to access some of the money in the future without restriction. The voluntary contribution can be combined with the life insurance relief. Thus, the maximum amount that you can claim for EPF contributions is up to RM 7,000, provided you have no life insurance.
Private retirement scheme (PRS):
The tax relief for PRS is up to RM 3,000. PRS has the same limitations as EPF but part of the fund may be withdrawn with a 8% tax penalty. Unlike EPF, each PRS fund is subject to price volatility. Thus, the return may not be as smooth as EPF and loss is a possible outcome. Nonetheless, give the long-term investment horizon, the probability of a gain is higher than loss.
Skim Simpanan Pendidikan Nasional (SSPN) [not in the diagram]:
These schemes are offered by Perbadanan Tabung Pendidikan Tinggi Nasional (PTPTN) and contributions are deductible up to RM 8,000. This relief only applies to net deposit (total deposits minus total withdrawals) during the year for your children. If you do not have a child, you are not entitled to claim this relief. Contrary to EPF and PRS, withdrawal from SSPN schemes has no restriction but the withdrawal process is not instantaneous. The schemes pay annual dividend but do not expect high yield.
Insurance
Education or medical insurance:
Medical insurance is a requisite for most people nowadays. Though you would wish you do not have to use it, it is better to be prepared than hope for the best, unless you are willing to go to government hospital. As for education insurance, I personally think you could put the money in SSPN schemes or other places for the savings part and get the protection from other insurance plans. The tax relief is up to RM 3,000, which I think is sufficient to get a good medical insurance plan if you enrol at a young age.
Life insurance (self & spouse):
Life insurance is usually utilised for estate planning. This insurance will provide money to the beneficiaries upon the insured’s death or to clear the insured’s debts. Depending on your situation, it is not a must-have but would be highly recommended if you have dependents.
Social Security Organization (SOCSO):
If you are eligible for SOCSO coverage, it is better to contribute. The protection SOCSO offers might tide you over during difficult times. Though the allowable amount for tax relief is not high, you are getting some rebate from this tax relief and the protection of SOSCO, so what’s to complain?
Education
Self skills enhancement course: In YA2024, lifestyle tax relief includes any skills enhancement courses. Previously, only courses recognised by Department of Skills and Development are allowed for deduction under the self education fee relief.
Self care
Dental treatment: The medical expenses relief is expanded to include dental examination and treatment, up to RM 1,000. I plan to utilise this relief in this year.
Tax rate
The table above shows the tax rate for YA2024, which is the same as YA2023. Let’s look at an example of investing in PRS. If your chargeable income (income after deducting all claimable tax reliefs without the PRS relief) is in the range of RM 70,001 to 100,000, your tax rate is 19%. If you invest RM 3,000 into PRS, you will be able to claim back RM 570 from tax authority in 2024. It is a return of 19% for your investment!
However, not everyone will benefit from the tax reliefs above. For example, it might be better to invest your money elsewhere rather than PRS if your chargeable income is less than RM 35,000. Thus, evaluate your own situation and plan early to take the full advantage of the tax reliefs available.
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Disclaimer: This page is for informational purpose only. Do confirm with the tax authority for the eligibility of the tax reliefs.
