While proposing Budget 2021, the Malaysian government has recently announced a noticeable reduction in the income tax rates. During the budget session, Finance Minister Datuk Seri Tengku has explained the reasons why it is imperative to lower the Individual income tax in Malaysia by one percent.
He further stated that individuals earning RM50,001 to RM70,000 taxable wages would benefit from this tax reduction. Hence, almost 1.4 million taxpayers would get benefit from the reduced income tax rate. This particular move is a part of the government’s initiative to minimize the tax burden on individual taxpayers amid the outbreak of Covid-19 pandemic.
Furthermore, the government has also revealed its intention to maximize tax relief in terms of medical expenses. If a taxpayer, spouse, or his/her child has received a medical treatment costing RM6,000 to RM8,000), such a person would also get increased tax relief. This tax relief would also be available for medical check-ups costing RM500 to RM1,000.
Talking about some other reliefs associated with reduced income tax in Malaysia, the government has also taken into account the burden on Private Retirement Scheme (PRS) contributors. This involves an exemption of up to RM3,000 for (PRS) contributors.
Individuals with disabled spouses would seek increased tax relief (from RM3,500 to RM5,000). In addition, a variety of lifestyle purchases have been rendered as tax exemptions. Tengku Zafrul also announced an increase in tax relief from RM2,500 to RM3,000 for such purchases.
Besides, the Employees’ Provident Fund (EPF) contribution rate has been lowered from 11% to 9%, starting from January 1, 2020 (for 12 months only). Tengku Zafrul believes that this particular aspect of income tax Malaysia would benefit the EPF contributors with an estimated cash flow up to RM9.3 billion.