Malaysian Income Tax Law

LECTURE 3
INDIVIDUALS
BY
DR JEYAPALAN KASIPILLAI

Individuals
Source
Residence
Types of Employment Income
Deductions Against Employment
Income
Personal Reliefs & Rebates
2

Source
Sec. 3 ITA67 Individuals are taxed for income accruing in or derived
from Msia or received in Msia from outside
BUT Para 28 Sch 6 Individuals are not taxed for income received in
Msia from outside Msia.

(Sec. 127 Any income in Sch 6 shall be exempt from tax)

Income from Msia

Income from outside Msia

Resident

Non-Resident

Taxable

Taxable

Not taxable

Not taxable

Graduated
( 0 - 25% )

Flat rate of 25%

Yes

No

[W.e.f.Y/A2004]

Tax Rates
Personal Relief

Residence of Individuals
Note : Commencement date of individuals employment &
his nationality are irrelevant to his residence status. Only
physical presence in Malaysia for a day/part of it is relevant.
There are 4 sets of circumstances under which an
individual would be deemed to be Resident in Malaysia
Sec. 7 (1) - An individual is resident in Msia for a basis year
for a Y/A if any one of the following applies :(a) He is in Msia for a period or periods amounting in all to 182 days
or more (covers both consecutive and/or cumulative ; or

Residence of Individuals (contd)

(b)

He is in Msia for less than 182 days in the basis year & it
is linked by/to another period of 182 or more consecutive
days (such period) throughout which he is in Msia in the
previous or following year: Provided temporary absence
from Malaysia [(i), (ii) and (iii)] shall be taken to form part
of such period
Note : Temporary absences means:
(i) If they are for matters connected with service in Msia/
attending conferences/ seminars/ study abroad; or
(ii) Due to his or her immediate familys illness; or
(iii) Social visits not exceeding 14 days) do not break the 182 or
more consecutive days requirement in Sec. 7 (1)(b); if t/p is in
Msia immediately prior to & after that temporary absence.
Note: As for Sec 7(1)(b), physical presence on the link days of
31/12 and 1 January is not necessary
5

Residence of Individuals (contd)

Examples
1) If present in Msia from 26.12.2014 (6 days) to 2.7.2015
(183 days), one is resident for Y/A 2014 & 2015 (Following
year example).
2) If 26.6.2014 (189 days) to 3.1.2015 (3 days), one
resident for Y/A 2014 & 2015 (Previous year example).
3) If 11.10.2012 (82 days) to 26.6.2013 (177 days): Not
resident for both years
Social visits not exceeding 14 days: The 14 days need not be
consecutive. It can be at the beginning middle or end of the
period making up the 182 consecutive days. Also, t/p need not
return on the 15th day.
In practice IRB accepts a holiday outside Malaysia as a social visit.

Residence of Individuals
(contd)
Prerequisite for s. 7(1)(b)
(i)

Link Period
linked to January (following year); or
linked by December (preceding year)

[But linkage does not need to be physical presence. Permitted temp

absence is included]

(ii)
(iii)

At least 182 consecutive days in link period

In Malaysia prior to & after the temporary
absence

Residence of Individuals
(contd)
(c ) He is in Msia for a total of 90 days or more in the basis
year AND in any 3 out of the 4 immediately preceding
basis years, he was either : resident in Msia (under any of the tests) ; OR
in Msia for 90 days or more in the basis years in question, i.e. in 3
out of the 4 preceding basis years ; or

(d) He is NOT resident in Msia in the basis year BUT he is

resident in the following year AND has been resident for
the immediately preceding 3 years.
Eg : An individual is resident in Msia for basis years 2012, 2013,
2014 and 2016 but NOT during 2015. He is deemed resident in
Msia for the basis year 2015.
8

Employment Income
Sec. 13 (2) - Gross Income in respect of gains or profits from
employment is deemed derived in Msia if it is : (a) For any period during which the employment is exercised in
Msia ; or
(b) For any period of leave that was attributable to the exercise of
the employment in Msia ; or
(c ) For any period during which the employee performs outside
Msia duties incidental to the exercise of the employment in Msia
(d) Directors ; or
(e) Those working on a ship/aircraft.
Note: Wef Y/A 2009, Sec.7 (1B) Msian citizen employed in public
services/stat auth is deemed res in a B/Y if out of Msia coz of
exercising employment/attending a course/sponsored by employer

Employment Income
(contd)
Note: Para 21 Sch 6 Non-residents income from
employment exercised in Msia is exempt from tax provided
he is not employed in Msia for more than 60 days in any
basis year.
Para 22 Sch 6 Income of non-resident individual not
exempt under Para 21 if employment in Malaysia is more
than 60 days or is income from employment exercised by a
public entertainer (i.e. prof entertainer, artiste, athlete, etc.
whether in public/private for profit on stage, radio, tv,
stadium, etc.)
Note : Para 28 Sch 6 & Sec. 127- Res & Non-Res Individuals
10

Is there an Employment relationship?

Sec. 4(b) Gains or Profits from Employment is taxable.
Sec. 2 Employment means :(a) employment in which the relationship of master & servant
subsists ; or
(b) any appointment / office, whether public or not & whether or not
that relationship subsists, for which remuneration is payable.

Sec. 2 - Employee means :(a) where the relationship of master & servant subsists, the SERVANT
; or
(b) where that relationship does not subsist, the holder of the
appointment / office which constitutes employment.

11

Employment relationship
Traditional test to establish the Employer
Employee relationship is based on the element of
CONTROL i.e. whether employer has control over
the way in which the employee is to conduct his
work.
FYI v DGIR - Employment ( contract of service )

12

Employment relationship
(contd)
YGL v DGIR [1988] Company Secretary for many
companies was exercising a profession, not in
employment.
S Sdn Bhd v DGIR [1995] A doctor who was a major s/h
of a clinic, was appointed as a consultant.
Held: Employee under a contract of service [sec(4)b]
because he or she was paid a fixed consultants charge of
RM3,000 per month + 40% of clinics net profits not
exceeding RM100,000 as salary.

13

Employment relationship
(contd)
Other indicators of Employer Employee relationship :i) Degree of skill
ii) Nature of remuneration
iii) Freedom to contract with other parties
iv) Presence of employment contract & its terms
v) Sharing of profits and losses
vi) Defined hours of work.

Note : Distinguish a Contract for Service [Sec. 4(a)] from Contract of

Service [Sec. 4(b) - employment].
Also distinguish employment [sec 4(b)] from a profession [Sec. 4(a)]
An individual may be deriving income from both a profession & an
employment.

14

Basis of Assessment
When is the Income Assessable ?
General Rule: Sec. 29 & Sec. 27 Income is deemed to be
received by a taxpayer when he is able to obtain the receipt
on demand (accrual basis), i.e. when it is due and payable. TCY v KPHDN [1996].
But employment income is taxed on a received basis under
Sec. 25 (1): Employment income is taxed on a received basis
provided the income is not attributable to a particular
period of employment and first becomes receivable in the
relevant period.

15

Specific rules on assessment accrued

basis
i) Sec. 25(2) When the income is attributable to a
particular period of employment, the income is taxable in
the Y/A in which the basis year is related to the period of
employment, irrespective of when the amount is received.
Eg : Bonus received in January for good work done in the
previous 12 months will be taxable as income of the 12
months (not January of the following year) , since it
relates to that period.

16

Specific rules on
assessment
ii) Sec. 25(4) Where the employment income receivable is
in respect of a period which overlaps another basis period,
the income is time apportioned, unless the DGIR directs
otherwise.
Eg: X is employed for 8 months from July 2014 to Feb
2015 & receives a bonus of RM16,000 for that period. The
assessment will be as follows:- Y/A 2014 6/8 x RM16,000 = RM12,000
- Y/A 2015 2/8 x RM16,000 = RM 4,000

17

Specific rules on assessment

(contd)
BUT Sec. 25(5) If the income is receivable during the
first basis period but it is in respect of work done during
the first and second basis periods, it is assessable during the
first basis period.
Eg : Paid in December for December and January,
assessable as December income (without time
apportionment).

18

Specific rules on assessment

(contd)
iii) Sec. 25(3) Where the employment income is received
for past services, i.e. services provided more than 4 years
from the current basis period (2015), it is treated as income
for the Y/A which began 4 years before the year of receipt.
Eg: If X received a bonus on 31/12/2007 (for year ended
2007), an additional assessment for the amount will be
issued for YA2011 [2015 4 = 2011] ?
[Note: This is an anti-avoidance provision to prevent loss of revenue to
Government if receipt of employment income is with respect to a
period more than 4 years before current basis period, which would be
time barred]

19

Specific rules on assessment

(contd)
iv) Proviso in Sec. 25(4)(a) If a lump sum is receivable by way of
gratuity or deferred payment upon cessation of employment, the
amount can be spread back over the past Y/As equally for when the t/p
was employed. The number of years that can be spread back depends on
the length of t/ps employment there but maximum is 6 years (i.e.
current basis period & 5 basis periods before that)
Eg: If X received a gratuity of RM60,000 on 1.5.2015 and X has been
employed from 1.7.2003 to 1.5.2015.
Commencement of employment 1.7.2003
Commencement of last basis period 1.1.2015
Since period of employment is > 5 years before 1.1.2015, the gratuity
will be spread back equally to 6 Y/As, i.e. RM10,000 from Y/A 2010
2015.

20

Summary of Assessing Employment

Income upon Termination of Employment
(1) Restrictive Covenants &
(2) Loss of Employment (Compensation received)
Sec.13(1)(e)(i) - Taxable as employment income.
Para 15(1)(b) Schedule 6 But given partial tax exemption
[ RM10,000 x years of service ] w.e.f. Y/A 2009

(3) Loss of Employment Compensation due to Illness

Para 15(1)(a) Sch 6 Total exemption

(4) Retirement Gratuity

Para 25(1) Schedule 6 - Must be 50 years old and more (or compulsory
age of retirement) AND must be working for 10 years for same employer
OR retiring due to illness. Tax exempt.

21

What is Employment
Income ?
Not all payments by an employer to employee are taxable
as gains or profits from employment.
Sec. 13 (1) Gross income of an employee in respect of
gains or profits from an employment include :(a) Any wages, salary, remuneration, leave pay, commission,
bonus, gratuity, perquisite or allowance (whether in money or
otherwise) in respect of having or exercising the employment.
o Hochstrasser v Mayes Upjohn J For a payment to amount to
employment income :i.
it must be made in reference to the services the employee
renders by virtue of his office; AND
ii. it must be something in the nature of a reward for services
past, present or future.
22

Possible Types of Employment

Income
(1) GIFTS & VOLUNTARY PAYMENTS (not taxable)
Moorhouse v Dooland Jenkins LJ : i.

If taxpayer has a contractual right to receive the payment as a result of

his employment, taxable.
ii. Objectively characterize payment from the receivers point of view. If
accrues because of employment, taxable.
iii. If payment is periodic or recurrent, points to direction of it being
taxable (but not conclusive).
iv. If payment is made in circumstances which show that it is a present or
is made on personal grounds because of receivers attributes or
characteristics, high regard in which he is held, then not taxable.

Eg of income : bonus, gift to director for job well done, tips.

23

Possible Types of Employment Income

(contd)
2) INDUCEMENT PAYMENT Sec 13(1)(a)
Where employer makes a payment to employee at the commencement
of his service, it is a question of fact whether it is a payment for future
services or by compensation for permanent loss of status or for giving
up a personal advantage as a result of taking up employment.
Wales v Tilley Remuneration for future services - taxable
Jarrold v Bousted Compensation for loss of amateur status - not taxable
Pritchard v Arundale Compensation for loss of senior partner status in
previous firm - not taxable

Note : But if nothing is given up, then the initial inducement payment
will be deemed to be prepaid remuneration & taxable.

24

Possible Types of Employment Income

(contd)
3) RESTRICTIVE COVENANTS Sec. 13(1)(e)
General Rule Payment received for observing restrictive covenants
are generally regarded as capital & not taxable.
But Sec. 13(1)(e) Gross income includes any amount received by
employee whether before or after his employment ceases, by way of
compensation for loss of employment, including any amount in respect
of
(i) a covenant entered into by the employee restricting his right after
leaving the employment to engage in employment of a similar kind. [
Thus, taxable ]
Para 15(1)(b) Sch 6 If payment is for loss of employment or for
entering into a restrictive covenant, then the employees number of
years of service with that employer x RM10,000 = is tax exempt ( i.e.
part exempt).
25

Possible Types of Employment Income

(contd)
4) COMPENSATION FOR LOSS OF EMPLOYMENT - Sec. 13(1) (e)
Sec. 13(1)(e)(i) Applies to compensation payment for loss of employment as
well as restrictive covenants.
Para 15(1)(a) Sch 6 Such payments are completely tax exempt if employment
ceased due to ill health.
o Ho Soon Guan v KPHDN [2002]

Para 15(1)(b) Sch 6 If payment is for loss of employment (not due to ill
health) or for entering into a restrictive covenant, then the employees number
of years of service with that employer x RM10,000 = is tax exempt.
Heywood v CIR (Privy Council) Taxpayers ex gratia and compensation for
loss of employment income of RM32,000 was NOT taxable since the amount
did not exceed the partial exemption limit in Para 15(1) (b) Sch 6.

26

Possible Types of Employment Income

(contd)
(5) PERQUISITE (Perks of the Job) Sec.13(1)(a)
It is any casual fee or profit attached to an office / position in addition to the
salary / wages.

May be casual or regular

May be voluntary or contractual
May be in money or in kind
Need not be derived from the employer directly.

Note : Wef Y/A 2008 Perquisites & benefits given as a long service award to an
employee by employer (must have served at least 10 yrs with same employer &
awarded as a meaningful contribution to the organisation) are exempt to a
maximum of RM2,000 per year. Balance taxable Para 25 C Sch 6. [Increased
from RM1,000 exemption in 2007]
Note: P R No. 1/2006 Distinction between Perquisites & BIKs

Perquisites = Benefits convertible to money s. 13(1)(a)

Benefits in Kind = Benefits not convertible to money - s.13(1)(b)

27

Possible Types of Employment Income

(contd)
(6) ALLOWANCE - Sec. 13(1)(a)
It is a sum of money paid to an employee which may or
may not be spent in a particular way i.e. car allowance
Allowance supplements employees main salary and is
taxable as part of employment income Ferguson v
Noble

(7) LEAVE PAY Sec. 13(1)(a)

Is the salary paid to an employee for the duration of his
leave.
A payment in lieu of leave not taken accrues when it is
receivable.
28

Possible Types of Employment Income

(contd)
(8) BONUSES S13(1)(a) [ Taxable DGIR v Highlands Malaya
Plantations Ltd [1988]]
A distinction must be drawn between contractual & non contractual
bonuses in determining the basis year in which the bonus is brought
to tax.
Contractual Bonus Accrues to employee in the basis year for which
it is payable. The actual payment date or declaration date is not
relevant in determining basis year Sec. 25(2).
Non Contractual Bonus Accrues to the employee at the date of
declaration ( not payment ) since the bonus is not receivable in
respect of a particular period of service - Sec. 25(1). But if it is
declared to be payable for a particular period of service, it accrues in
the basis year for which it is payable Sec. 25 (2).

29

Possible Types of Employment Income

(contd)
(9) GRATUITY Sec. 13(1)(a)
Is a gift of money in addition to salary to a retiring/ resigning employee
for services rendered. Taxable.
The manner in which it is paid does not alter the nature of the
gratuity DGIR v Leong Ngoh Sang [1982].
A retirement gratuity is exempt from tax under Para 25(1) Sch 6
provided due to ill health [Para 25(1)(a)] or he is 50 years and above
and has been employed by the same employer for at least 10 years
[Para 25(1)(b)]
Note : Subsequent employment after 50 is irrelevant.
Note : Also, dont confuse this with loss of employment
compensation which is subject to partial tax exemption under Para
15 Sch 6.

30

Sec. 13(1)(b) Benefit in Kind

Sec. 13(1)(b) Employment income includes the value of
the use or enjoyment by the employee of any benefit or
amenity provided for the employee by or on behalf of the
employer.
Note: Income taxed under Sec. 13(1)(b) include

Car benefit (private use)

Fuel
Furnishing
Driver/ Gardener/ Maid
Utilities/ Bills

31

Sec. 13(1)(b) Benefit in Kind

(contd)
Benefit in kind (BIK) is valued in one of the 3 following ways :i.
Where scale rates are provided by the IRB
See: IRB Guidelines for valuation of benefits in kind provided to
employees. [MT: pp.100 101]
ii.

Where special valuation rules are provided by the ITA67

Eg: Sec. 32 Value is the cost to employer on just & reasonable
basis.

iii.

Where not covered by (i) or (ii), value on moneys worth basis if

convertible to money (i.e. its market value) or otherwise, what it
costs the employer to provide it to the employee.

32

Possible Types of Employment Income

(contd)
(10) DOMESTIC HELP + GARDENER + BILLS - s.13(1)(b)
Assessable amount Domestic help = RM4,800 p.a.
Gardener =RM3,600 p.a.
Exempt BIKs - Sec. 13(1)(b)
(i) - Medical, dental treatment & childcare benefits provided by
employer;
(ii) - Leave passage w/i Msia not exceeding 3 x p.a. or 1 overseas
leave passage p.a. up to a max of RM3,000 for employee &
immediate family members; etc.
[Note: PR No. 1/2003 Clarifies Sec. 13(1)(b)(ii) and reads the or as
and.]

33

More exemptions w.e.f. Y/A

2008
(via statutory order)
Petrol/travel allowance for official duties up to RM6,000;
Allowance/subsidy for childcare up to RM2,400 p.a;

Parking fees/allowance, meal allowance, phone bills, internet subs,

phone/mobile phone, pager, pda;
Employers own goods provided FOC or at a discounted value where
discount value =< RM1,000 p.a;

Employers own services provided free/at a discount provided the

benefit is not transferrable, i.e. private schooling;
Subsidies on interest on loans totaling up to RM300,000 for housing,
passenger vehicles & education;
Medical benefits extended to include maternity & traditional medicine.
34

Possible Types of Employment Income

(contd)
(11) CARS & DRIVERS s. 13(1)(b)
The benefit of a car and/or driver provided is taxable.

The taxable benefit is confined to the private miles traveled (which

includes mileage between the employees home & office).
The IRD has issued guidelines on the valuation of this benefit which
increases with the value of the car (PTO).
If the car is more than 5 years old, the annual value is reduced by half
BUT fuel cost remains unchanged .
If driver provided, the assessable value RM600 per month (or
RM7,200 pa)

35

Assessment of car & fuel

provided
(value of private use of the car) GMT p.
100
Cost of Car (new)

Annual Value of BIK

Fuel (pa)

Up to RM50,000

RM 1,200

RM 600

50,001 - 75,000

RM 2,400

RM 900

75,001 - 100,000

RM 3,600

RM1,200

100,001 - 150,000

RM 5,000

RM1,500

150,001 - 200,000

RM 7,000

RM1,800

200,001 - 250,000

RM 9,000

RM2,100

250,001 - 350,000

RM15,000

RM2,400

350,001 - 500,000

RM21,250

RM2,700

500,001 & above

RM25,000

RM3,000
36

Possible Types of Employment Income

(contd)
(12) SHARE INCENTIVES & OPTION SCHEMES Sec. 13(1)(a)

Where an employer issues shares to his employee in lieu

of cash remuneration (whether wholly or in part), the
shares are a perquisite in kind but are convertible into
money, so they fall under Sec. 13(1)(a) [ NOT under Sec.
13(1)(b) ].

Value represented by the shares is the market value of

the shares at the date on which they were given to the
employee. Subsequent fluctuations do not affect the
employees income Weight v Salmon.

37

Possible Types of Employment Income

(contd)
If shares are issued / sold to employees on other
favorable terms, i.e. 50% below market value, etc. then,
the preferential right is a taxable perquisite accruing to
the employee and the assessable value is the difference
between the market value and price paid Tyre v Smart
[1979].

Share Options An employee who is granted a share

option is taxable (only if the option is later exercised) on
the difference between the market value of the option at
the date it is granted and the option cost - Abbott v
Philbin [ Any gain from exercising the option is not
taxable as employment income]
38

Possible Types of Employment Income

(contd)
(13) ACCOMODATION s. 13(1)(c)
Sec. 13(1)(c ) Employment income includes an amount
in respect of the use / enjoyment by the employee of
living accommodation in Msia (including in premises
occupied by the employer) provided for the employee by
or on behalf of the employer rent free or otherwise
subsidized.
2 Categories - Sec. 32(3) Non Service Directors of a
Controlled Company.
- Sec. 32(2) Other Employees .
Note: P.R. No. 3/2005 Tax treatment of value of living
accommodation is explained.
39

Possible Types of Employment Income

(contd)
i) Non Service Directors of a Controlled Company
Not service directors Sec. 2 who are employed in the
service of the company & own less than 5 % of its shares
directly / indirectly.
Controlled company Sec. 2 a company having not
more than 50 members & controlled by not more than 5
persons.
Sec. 32(3)(a) Assessable value of living accommodation
is the full defined value of the accommodation.

40

Possible Types of Employment Income

(contd)
Defined Value means - Sec. 18 : (i) the rent on the unfurnished accommodation if it is rented /
leased from an independent lessor dealing at arms length
(provided not under rent control) ; or
(ii) in any other case, theratable value/annual value or in its
absence the economic rent. [See: Sec. 18]
(ii) Other Employees
Sec. 32(2) Assessable value of living accommodation provided for
an employee is
(a) the defined value of the accommodation OR 30% of the gross
employment income from the employment falling within Sec.
13(1)(a) , whichever is LOWER; OR

41

Possible Types of Employment Income

(contd)
(b) 3 % of the gross employment income within Sec. 13(1)(a) if the
living accommodation is a hostel, hotel, etc. or any premises on a
plantation / forest, etc.
Reference to living accommodation is unfurnished accommodation.
The value of furniture is considered an amenity additional to the 30%
and is to be also included in the gross income. Furnishings are
calculated by reference to the IRDs guidelines as to the prescribed
average lifespan of various items of furniture & equipment.
Based on this, the Annual Value = Cost of Asset
(if item by item)
Prescribed Average Lifespan

42

Household
Sec.13(1)(b)

furniture/appliances

Household furniture/appliances value of benefit in kind

(IRB Guidelines): (1) Semi furnished with lounge, dining room & bedroom
furniture RM70 per mth = RM840 pa.
(2) Semi furnished with (1) plus one or more air
conditioners & carpets RM140 per mth= RM1,680 pa
(3) Fully furnished with (1) plus (2) plus kitchen
equipment / crockery / utensils / appliances RM280 per
mth = RM3,360 pa.

(4) Service charges & other bills (utility, phone) benefit

based on amount paid by employer.
43

Deductions
Income

Against

Employment

Deduction of expenses from gross employment income is governed by : (i) Sec. 33 [ Deductions in general ] ;
(ii) Sec. 38 [ Deductions against benefits in kind on furnishing &
living expenses.] ; and
(iii) Sec. 38 A [Deduction for entertainment expense]
(i) Sec. 33
Expenses only deductible if wholly & exclusively incurred in
production of employment income, i.e. must be incurred in the
performance of employment duties.

Note: Not much scope for deduction here, as most of the

expenses incurred by an employee in performance of his
duties usually borne by / reimbursed by employer
44

Deductions Against Employment Income

(contd)
Examples of Deductibles under Sec. 33 : Annual subscriptions to professional societies provided the
employment duties require this;
Subscriptions to technical journals, magazines and expenses
incurred in renewal of reference books, provided required in order
to discharge employment duties & not just to enhance knowledge
and keep abreast with developments in field of work KPHDN v Dr.
Arunjit Dutt;
Traveling expenses incurred by employee in the course of his
duties (i.e. necessary in order to perform his duties), provided not
reimbursed by employer for them Elwood v Utitz;

45

Deductions Against Employment Income

(contd)
Where an employee is granted a car allowance, it is
taxable (as a perquisite) but the employee can claim a
deduction for the actual car expenses incurred in
discharging his duties.
W.e.f. Y/A 2008, prof indemnity insurance premium is
deductible under Sec. 33(1) via statutory order.

Examples of expenses Not deductible under Sec. 33: Traveling to take up new employment ;
Cost of obtaining qualifications / improving knowledge
(even if it was a condition of employment) Humbles v
Brooks ;
Entrance fees paid by employees to professional
societies;
46

Deductions Against Employment Income

(contd)
Expenses incurred by employee in traveling to place of work
(cos this is to put him in a position to discharge his work
rather than the actual discharge of his duties) Nolder v
Walters would be private & domestic in nature.
Commission paid to employment agency, not deductible
cos paid to create an employment source & not incurred in
production of employment income Short v Mcilgorm.
Initial purchase of clothes/uniforms not deductible cos
capital expenditure but the renewal of clothing expense
only allowed if it is uniform/clothes unsuitable for general
personal wear.

47

Deductions Against Employment Income

(contd)
(ii) Sec. 38
The deductions in Sec.38(1)(a) & (b) are against the employment income in
kind assessable under Sec. 13(1) (b) & (c) and Sec. 32 i.e. in relation to
accommodation, furniture, etc. Eg: fire insurance, repairs to house
(iii) Sec. 38 A
Employees can claim a deduction for entertainment expenses so long as
incurred wholly & exclusively for production of gross employment income
provided they are taxed on the entertainment allowance under Sec. 13(1)(a)
[ Note: Unlike an employer coz of Sec. 39(1)(l) ]
The deduction under Sec. 38A must not exceed the entertainment allowance
included in the gross income under Sec. 13 (1) .
Entertainment expenditure is NOT deductible if the entertainment is of a
regular and primarily social nature i.e. where the employment aspect is
merely incidental.

48

Personal Relief
Personal Relief is given as standard deductions against an Individual taxpayers
Total Income ( sources of income are irrelevant at this stage which comes after
aggregate income)
Personal Relief only given to Msian Resident Individuals for a particular Y/A in
which a claim for it is made under Sec. 47 Sec. 50 => Sec. 51 ( i.e. it is Not
automatic ).
Excess reliefs cannot be refunded or carried forward.
The types of relief claimed by a taxpayer in any Y/A are affected by his personal
circumstances in that basis period.

(i) Personal Relief Sec. 46

(ii) Wife or Former Wife Relief Sec. 47
(iii) Husband or Former Husband Relief Sec. 45A
(iv) Child Relief Sec. 48
(v) Insurance Premiums & EPF Sec. 49
(vi) & (vii) Rebates [General & Low Income Earners] Sec. 6A
49

(i) Personal Relief / Deductions

Sec. 46
(a) Personal relief of RM9,000 ( regardless of age ).
(b) Medical expenses up to RM5,000 on t/ps parents(incl nursing home
& dental)
[W.e.f. Y/A 2011 - includes carer expenses (even foreign maid wt stipulation in
work permit but not t/p, spouse, children)]

(c) Disability relief up to RM 6,000 for basic supporting equipment for a

disabled self, wife, child or parent. (increased to RM6000 from YA2015)
Parental care YA2016 RM1,500.
(d) Further RM 6,000 for a disabled taxpayer.
(e) Actual cost up to a maximum of RM5,000 for pursuing any course of
study at Undergraduate / Masters / Doctoral level in a Msian institution
recognized by the Govt (increased to RM7,000 from YA2016)
50

Personal Relief /
Deductions
(g) Up to a maximum of RM 6,000 on medical expenses if the taxpayer,
his wife or child is suffering from a serious disease such as AIDS,
Parkinsons disease, cancer, renal failure, leukemia or other serious
diseases. (increased to RM6000 from YA2015)
(i) Up to RM1,000 (with receipt) allowed for purchase of books,
journals, magazines, etc for own use, spouse or child.
(j) Wef Y/A 2007 t/p is given a relief of RM3,000 for a Y/A in respect of a
purchase (with receipt) of a personal computer in that Y/A. Relief
allowed once in 3 years. Each t/p can claim the relief in separate
assessments (must be for private use only).

51

Personal Relief / Deductions

(contd)
(k) Wef Y/A 2012 2017 T/ps relief for deposits in the National
Education Savings Scheme (SSPN) is increased to RM6,000 (from
RM3,000)

(l) Up to RM300 given each year for purchase wt receipt of any sports
equipment under the Sports Development Act 1997.
Note : A married woman may also claim these relief unless she elects
for joint assessment with her husband .

52

(ii) Wife or Former Wife Relief Sec. 47

An individual resident for the basis year of a Y/A who had a wife living
with him is given a wife relief of RM 3,000 (increased to RM4,000 from
YA2016) with a further RM3,500 if the wife is disabled Sec 47 (1)
A full years relief is given for the year of marriage (even if they cease
to live together or cease to be husband & wife during that year )
without any time apportionment.
Living together is based on intention, not geographical separation
King v Wilbert [1919]
3 Possible Situations :i) Wife also has income Separately assessed No wife relief - Sec.
47 (4) ;
[ Note : Here, husband & wife are treated as separate taxable units ]

53

Wife or Former Wife Relief

ii) Wife also has income Jointly assessed due to Sec.
45(2)(a) election by the wife Wife Relief
[Note : Sec. 45(2)(a) The wife / husband may elect in
writing in the Y/A for joint assessment. To qualify, the
following conditions must be satisfied :(a) husband & wife must be living together & they do not cease to
be married to each other in the basis year;
(b) wife / husband must have total income ;
(c ) if wife / husband is a non-resident for the basis year for a Y/A,
she/he then must be a Msian citizen. ]

54

Wife or Former Wife Relief

iii) Wife has No income No assessment for wife Wife Relief Sec. 47
(5) [ may separate during the year & get full relief ]
Sec. 47 (2) If the husband & wife are separated or divorced & husband
makes maintenance payments to her, he can claim a relief for the total /
aggregate amount of those payments.
PROVIDED that the total amount claimed for relief under Sec. 47(1)
(wife relief) AND Sec. 47 (2) (maintenance payments) for any Y/A does
NOT exceed RM 3,000 Sec. 47 (3) .
[Note: The alimony received by ex-spouse is taxable via Sec 4(e)]
[Note: Wef Y/A 2012 @ Sec45(5) Election for Joint Assessment can be
made in the tax return itself & not before 1st April of the Y/A]

55

(iii) Husband or Former Husband Relief

Sec.45A
W.e.f. Y/A 2001 Where a husband has no total income or
no source of income and an election has been made by
husband under Sec. 45(2)(b), the wife is given a relief of
RM3,000 with a further RM3,500 if the husband is disabled.
[wef Y/A 2005]
Note: P.R. No. 2/2005 Wife can claim husband relief where
husband has no source of income.
[Note: It is only applicable to one wife, if t/p is polygamous]

All other items apply in pari passu with wife relief.

56

(iv) Child Relief - Sec. 48

Where a resident individual maintains a child (wholly / partly) at any
time during a basis year, he is entitled to child relief for each child
under Sec. 48(2) & 48(3) provided it is a qualified child under Sec.
48(1). And for an unrestricted number of children Sec. 49(2)(a).
Note : Sec. 48 (9) Child includes legitimate, step & legally adopted
child. (not illegitimate child)
To claim relief under Sec. 48(1), the child must be a qualifying child
under any provision in Sec. 48(1)(a) (d): (a) unmarried & under 18 years of age at any time in the basis year
;[Sec.48(2)(a)-RM1,000 per child pa] OR
(b) unmarried (of any age) & receiving full time instruction at any
university, college, school or other similar educational institution;
OR
(increased to RM2,000 from YA2016)
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Child Relief
(c) unmarried (of any age) & serving under articles or
indentures in order to qualify in a trade/profession ; OR
[ Note : Sec. 48 (3) (a) If any child at any time in the basis year is over
18 years AND is receiving full time education at a university, etc
(under Sec. 48(1)(b)) or serving under articles, etc (under Sec. 48(1)(
c)), the taxpayer is entitled to child relief at the LOWER of the Actual
Expenses incurred directly on the maintenance & education of the
child ; OR
6 times the normal child relief i.e. RM1,000 x 6 ( if the child
receives his further education IN Msia at diploma level & above &
ABROAD at degree level & above) [s. 48(3)(a) @ w.e.f. Y/A 2013].
(increased to RM8,000 from YA2016)
58

Child Relief (contd)

(d) unmarried (of any age) & proved to DGIRs
satisfaction that child is physically or mentally
disabled.
[Note : Sec. 48(2)(b) Relief is RM 6,000 each
child] (increased to RM6000 from YA 2015)
[W.e.f. Y/A 2013, additional RM6,000 given if child
is pursuing tertiary education in Msia / abroad]

59

Child Relief (contd)

Note :
1) No relief is given to an individual in respect of any child whose total
income for the Y/A exceeds the relief claimed Sec. 48 (5). [Where child
earns income]
2) A qualifying child who died during the basis year is treated as a
qualifying child throughout the basis year, so, full child relief is given.

3) When a wife living together with her husband is assessed separately

on her income, she may elect in writing that the deduction be wholly
allowed to her for that Y/A (as opposed to the husband).
4) Where a deduction is claimable by two persons for the same child (
i.e. following a separation ), the total deduction must NOT exceed the
prescribed child relief. The relief for each claimant in respect of the
same child is 50% of the total amount spent Sec. 48(4).
60

(v) Insurance Premiums & EPF Sec. 49

Sec. 49 (1) - A maximum of RM 6,000 relief is allowed annually for Life /
Endowment Insurance Premium payments paid (not just payable) (on
own/spouse/joint lives) and Employee Provident Fund (EPF)
contributions in aggregate (and contributions to other approved funds)

Note: Sec. 49 (1A) For joint assessment (& separate assessment) a further
deduction up to RM6,000 given for any ins & EPF contribution made by spouse
as well (provided, for joint assessment, spouse has a total income. O/wise only
husband gets.)
Sec. 49 (1B) For premiums paid on medical or education policies for
self/spouse/child, a maximum of RM3,000 additional relief is allowed. For joint
assessment, max deduction is RM3,000. [For separate assessment ,further
deduction up to RM3,000 can be given for spouse]
61

(v) Insurance Premiums & EPF Sec. 49

Sec. 49 (1D) - Wef Y/A 2012 Contributions to Deferred Annuity
Premium and/or Private Retirement Schemes (PRS) Contributions will
be entitled to a maximum of RM3,000 relief.

[Note: But withdrawal of contributions before the mandatory retirement

age of 55 (other than due to illness or permanently leaving Malaysia) is
subject to 8% withholding tax to be paid over to the IRB.]
Sec. 46(1)(n) Employees contribution to Social Security Scheme
maximum of RM250 per annum from YA2016.
Special Relief RM2,000 for YA2015 for individuals earning less than
RM96,000 pa.

62

(vi) Rebates (for low income earners) Sec. 6 A

Sec. 6A (2) An individual who is resident in Msia is given the following
rebates for a Y/A, to be set off against tax payable where the
chargeable income does not exceed RM 35,000 : 1) RM 400 for an individual.
2) A further RM 400 if he has a wife living with him & she is not
separately assessed OR if he is separated / divorced AND maintaining
a wife.
3) RM 400 to a wife who is separately assessed, provided her
chargeable income does not exceed RM35,000. [Note: The wife is
still entitled to the rebate even though her husbands chargeable
income is more than RM 35,000 coz assessed separately]

63

Rebates (for low income

earners)
Sec. 6 A (4) - Where the rebate exceeds the income tax
payable for a Y/A, the excess is NOT treated as a tax refund
nor available to be carried forward as a credit to set off any
future tax payable.
Note : The rebate under Sec. 6A is given in the form of a
deduction against the tax payable.

64

(vii) Rebates (Sec. 6 A)

Sec.6A (3) A tax rebate is granted for a Y/A for any
zakat/fitrah/any other Islamic religious dues which is
obligatory & paid in that basis year & evidenced by an
appropriate receipt issued.
Note: Addendum to P.R. No. 2/2005.
Where only husband/wife has a source of income & both
contribute zakat, only the zakat paid by the employed
spouse is claimable.
Where there is a joint assessment, only zakat paid by
the spouse who is assessed is claimable.
65