Talking about the Year of Assessment 2020, the Malaysian government has introduced a considerable number of income tax changes and reliefs. These amendments are permanent additions, which were presented in the national budget. Moreover, a few of these changes were introduced as an integral part of the pandemic (Covid-19) relief package.
While filing your tax returns every year, it is essential to take into account the income tax amendment for the next Year of Assessment (YA). To assist you, we have discussed the changes and tax reliefs for YA2020 that every tax filer should know.
Claim Up to RM2,500 Tax relief for the Purchase of Smartphone, Tablet, or Personal Computer
With the purchase of a personal computer, smartphone, or tablet, you can claim an additional RM2,500 as tax relief. Titled as lifestyle relief, you can seek this benefit on the above-mentioned electronic devices that are manufactured from 1 June 2020 to 31 December 2020. This relief is offered in addition to the existing tax relief of RM2,500 that falls under the lifestyle category.
However, to avail of both these reliefs, the devices should be purchased for personal or family use (Not purchased for commercial purposes). This kind of tax relief is an indication that the Malaysian government is playing its role to promote “Work from Home” arrangement during the outbreak of Covid-19 pandemic last year.
At that time, it was clearly announced that this kind of tax relief is going to be extended till 31 December 2021. Nevertheless, it isn’t certain that whether this relief would be available for those who have already availed it during YA2020. Announced in February 2020, this tax relief was aimed to strengthen the tourism sector. Therefore, it was launched as a part of the Economic Stimulus Package 2020.
Up to RM3,000 Increase in Childcare Tax Relief
During YA2020 and YA2021, the tax relief for childcare expenses has been increased up to RM3,000. This relief falls under the ambit of PENJANA Economic Recovery Plan, aimed to boost “Work from Home” jobs.
Fertility Treatment Tax Relief up to RM6,000
Fertility treatments are now included under medical expenses as claimable tax relief. You can claim up to RM6,000. Below are the treatments that fall under fertility treatment.
- Intrauterine Insemination (IUI) treatment
- In vitro fertilization (IVF)
- Any other fertility treatments
The medicines bought for such treatment as well as the consultation fees are also claimable under this tax relief. With a view to qualify, the person getting fertility treatment should have a married status. The deductible amount can reach up to RM6,000.
7% to 10% Increase in Tax Deduction for Donations
The tax relief on certain donations and contributions is up to 10% of the taxable income of an individual. This tax deduction applies to the following donations.
- Contribution or donation made to an approved sports body or sports activity
- Contribution or donation made to approved institutions, funds, or organizations
- Contribution or donation made to any project (approved by Ministry of Finance) that relates to national interest
Tax Relief/Deduction made for Covid-19 Contributions and Donations
With effect from February 2020, all the contributions and donations that are made to deal with Covid-19 pandemic will be considered as the tax deductibles. This tax relief would be available until the government announces that the pandemic is over.
According to the Ministry of Finance, donations and contributions made to the Covid-19 Fund of Ministry of Health and Covid-19 Fund of Ministry of Disaster will also be considered as tax deductions.
While filing personal income tax, the individual can claim up to 10% of his/her taxable income by donating or contributing to an eligible Covid-19 Fund.
Sale of Residential Properties is Exempted from RPGT
If you are a Malaysian citizen and want to sell your residential property, the transaction would be exempted from Real Property Gains Tax (RPGT). However, this tax exemption is available only if the property is sold within a period of 1 June 2020 to 31 December 2021. Furthermore, an individual can sell not more than three properties during this period.
This particular exemption was previously announced in June 2020 as a part of PENJANA Economic Recovery Plan. The basic aim behind this exemption was to stimulate the housing market through consistent activities.
Personal Computer, Smartphone, or Tablet Received from Employer is Exempted from Tax
Usually, when an employer offers a personal computer, smartphone, or tablet to his/her employee, this would be referred to as a part of such employee’s income. Hence, such a device would fall under the ambit of taxation.
However, from the YA2020, employees are no longer liable to pay tax on the value of a gift (smartphone, personal computer, or tablet) received from the employee. This tax exemption was also declared during the launch of PENJANA Economic Recovery Plan. It isn’t available to an individual who is a partner, sole proprietor, or an employee of a company.
Individuals Earning over RM 2 Million would Fall under New Band of Income Tax
Individuals earning over RM2 million/year would be treated under a new band of income tax. This group is going to be taxed at an increased rate of 30%, which is two percent higher than a lower band. In the past, individuals earning over RM1 million/year were previously liable to pay 28%. This amendment was discussed and approved during Budget 2020.
After knowing all the tax amendments and changes made for the YA2020, now you can claim the relevant exemptions if eligible.