26 Ways to Slash TAXES - Part 1

They are legal and permitted by Inland Revenue Board ( IRB )

1) Save for your Child’s Education
Since 2007 , any amount that is deposited into a savings account for your child under national Education Savinds Scheme ( Skim Simpanan Pendidikan Nasional ) allows you to claim tax deductions.

Thers is a limit of RM 3000 for this deduction but spouse who file separate tax returns can each claim this amount .

Tax Deduction : RM 3000 per individual

For Mr A : As he falls in the 24% tax bracket , this deduction translates to a tax saving of RM 720 ( RM 3000@24%)

2 ) File Separate tax returns
A separate assessment allow each spouse to claim personal tax relief of RM 8000 while a joint tax return allows one spouse to claim a wife or husband relief of RM 3000

Tax Deduction :
Each spouse earning Taxable income can claim personal tax relief of RM 8000 by filling separate tax returns.

3) Ask your employer to increase your EPF contributions
Contributions to the employees Provident Fund (EPF) by employers are tax-exempt for the employees.

To reduce your taxable income , ask your employer to reduce your EPF monthly salary but increase your EPF contributions by the same amount.

Tax Deduction :
The deductible amount from your taxable income is dependent on the arrangement between you and your employer.

For Mr A : Mr A agrees to takle monthly pay cut of RM 1000 for an equivalent increase in his EPF contributions by his employer.At the end of the year , he receives an additional RM 12000 in his pension fund but his taxable income is reduced by the same amount.

The tax saving that he makes is RM 2880 ( RM12000@24%)


4) Change your cash remuneration to cash reimbursement
Fixed allowances given by your employer each month for entertainment and housing or parking fees are taxable at your tax bracket.
Change this to a “ reimbursement “ based on receipt and you are not taxed on the amount received.

Tax Deduction :
The deductible amount from your taxable income is dependent on the arrangement between you and your employer

For Mr A : By Changing a yearly fixed allowance of RM 6000 to a reimbursement of the same amount and supported by receipts , Mr A makes a tax saving of RM1440 ( RM 6000@24%)


5) Ask for a company car
A car given by your employer is regarded as a benefit-in kind ( BIK ) and taxable.

However , a company car is advantageous for taxpayers because the preset tax scale for cars is much lower than the actual cost of buying and maintaining a car.

According to the Public ruling for BIKs , the tax payer must pay RM 3600 in taxes every year, for a car worth RM 75000

If the employer pays for fuel , the tax payer is taxed an additional RM 1200 for this BIK

Tax deduction :
Whether you benefit from a company car depends on the value of the car and your current tax bracket. Do the calculations to ascertain your tax deduction.