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What are Income Tax Reliefs, Rebates, Deductions, And Exemptions according to

regulatory bodies in Malaysia today???

As far as concerned of accumulating your income tax, for sure it’s not new idea for you of having tax reliefs. No doubt about that tax reliefs are what we carefully keep our important receipts for, all with the aim of getting a bigger tax refund, is’nt it? However, tax reliefs for sure arn’t all when it comes to reducing amount of tax you pay.

Besides tax reliefs, income tax reliefs, there are tax rebates, tax deductions, and even tax exemptions as well there as an option.

Though all these play various voles in reducing burden of tax bill for an entrepreneur or company.

This blog is for those group of intelligent minds who want to get a better grasp of how these different types of deductions affect your tax returns.


Let’s say, If you think that tax exemptions don’t really concern you because you don’t claim for them in your returns form, you are about half correct. Considering the exception of incentives claimable under Section 127 of the Income Tax Act 1976, most tax exemptions won’t appear in your income tax returns form.

Exemptions are infact a certain types of income that are exempted from tax. These don’t count towards your taxable income and so wouldn’t be part of the aggregate income figure that you fill in in your BE form. Normally the part of your income or allowances that are tax exempted are displayed in an isolated section in your EA form, in order to keep them not included in the total income amount that you will be taxed for.

This is why, it may not be really one’s responsibility to determine what portion of your income is tax exempt as it may already laid out on your EA form. Well however, if you’re not in regular employment or have a lot of pre-requirements and benefits-in-kind to keep track of, it’s critically important that you are aware of what tax exemptions you to follow.

Income Tax Reliefs In the land of Malaysia

Have you ever bought a book or a smartphone and made a mental note to claim for income tax relief the next year? If yes, then you know how income tax reliefs work. Tax reliefs permits you to squeeze your chargeable income. Your chargeable income affects what tax rate you will be charged for, which can drastically help reduce the amount of tax you have to pay.

For instance, let’s say your annual taxable income is RM80,000. Based on this amount, the income tax you should be paying is RM2,000 (at a rate of 8%). However, if you claimed a total of RM23,600 (approximately) in tax relief, your chargeable income would reduce to RM56,800 approx. This would allow you to drop down a tax bracket, lower your tax rate to 3%, and reduce the amount of taxes you owe in a big way.

Income Tax Deductions In Malaysia

A tax deduction works really well quite similarly to a tax relief as it as well helps to reduce the amount you need to pay tax on. Though, it’s mentioned officially under a different part in your income tax returns form and technically reduces your aggregate rather than chargeable income – however the end effect is usually identical.

The kinds of expenses that are tax deductible are not identical from that of tax reliefs. Tax deductions usually apply to donations, gifts, and contributions, such as a gift of money to a charity, organisation, or even the government. Members of professional bodies who pay a subscription fee can possibly claim this amount of expenditure as tax deductible. Meanwhile, tax reliefs services more to the needs of the everyday Malaysian.

Income Tax Rebates In Malaysia

Intances of tax rebates in Malaysia include tax rebates for zakat/fitrah, tax rebates for individuals whose chargeable income is below RM35,000, and tax rebates for married couples with joint tax files. Tax rebates work apart compared to tax reliefs and tax rebates because they actually reduce the amount of tax charged, not your chargeable income.

For instance, you had a total annual income of RM45,000. In tax reliefs, you claim RM9,000 for automatic individual relief and RM2,500 for lifestyle expenses. This brings your chargeable income down to RM33,500, so you are taxed a total of RM555. Without a tax rebate, RM555 would be the amount of tax that you have to pay. Hence, you are eligible for the individual tax rebate (RM400 off tax charged for individuals with a chargeable income below RM35,000), you only owe RM155 in tax as a whole.

How To Maximise Your Income Tax Refund Malaysia

By the end of the day, we use tax reliefs, rebates, and so on to reduce the amount of tax we pay. Normally, because we’ve already been paying our income tax throughout the year in the form of monthly tax deductions (MTD, or also known as PCB), this would translate to using tax reliefs and the like to get a bigger tax refund. The lesser the amount of tax charged according to your income tax returns form, the more money you will get in your tax refund from the government – and this is something we like!

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