Every year, Malaysians groan and gripe whenever tax season rolls around as it signals the time for them to calculate how much of their earnings they should give to the government in the form of income tax.
But many have also asked, what exactly is income tax and why should we pay it in the first place. To answer this question, we need to first understand what it’s meant for.
What is income tax?
Income tax is a tax that governments charges on the earnings individuals and businesses make every year. As such, they must fill out a form that outlines how much tax they owe.
Governments use income tax to fund several key services such as schools, roads, and the police. Besides the federal government, certain states may also collect income tax at the state level.
Who then, is taxable under the income tax? Answer: If your annual income exceeds RM34,000 after EPF deductions (approximately RM2,833.33 monthly), you are required to file your income tax.
But some may also ask why even impose such a tax when the process is known to be complicated and a hassle, here are some reasons why you SHOULD NOT skip on filing your income tax:
1. Legal obligations and consequences
- It’s required by law under the Income Tax Act 1967
- You could face fines of between RM1,000 to RM20,000, up three years in prison, or both if you’re found dodging your taxes.
- Avoiding taxes might lead to a penalty that is triple the amount you originally owe.
2. Income tax is based on earnings
- Malaysia practices what is called ‘progressive taxation’, whereby those who earn more will be taxed more and vice versa.
- This approach helps ensure that everyone pays taxes according to what they can afford.
- It also helps share wealth more evenly and prevents extreme poverty from happening.
3. Helps fund essential services
- Your tax money goes to important things like hospitals, schools, roads, and keeping the country safe.
- Without money from taxes, these services wouldn’t have the resources to function effectively and everyone’s lives will be affected.
4. Holds the government accountable
- When you pay your taxes, you’re indirectly holding the government responsible on how it spends your money.
- When everyone knows where the money is going, the government’s trustworthiness is being gauged as well.
5. It’s what you should do as a citizen!
- Paying taxes isn’t just about following the law; it’s also about being a good citizen.
- It shows that you care about your country and want to help it grow and do well.
- By paying taxes, you’re helping make sure that everyone gets what they need to live better lives.
Recently, the Malaysian government has made filing taxes easier, where they’ve simplified the process and made it more convenient for taxpayers. Now, with online platforms like the Lembaga Hasil Dalam Negeri (LHDN) ezHasil website, people can fulfil their tax duties quickly and easily.
Income thresholds and tax obligations
If you earn over RM34,000 yearly after EPF deductions (around RM2,833.33 monthly), you need to register for a tax file. This includes income from:
- Monthly salary
- Business or profession
- Dividends
- Interest
- Rent
- Royalties
- Premiums
- Pensions
- Annuities
- Other sources
Moreover, salaried individuals should consider additional taxable earnings such as bonuses, overtime pay, and commissions. Even freelancers and part-time workers must register and file taxes if their annual income exceeds RM34,000.
Individuals earning income from abroad (foreign-sourced income) are exempt from Malaysian taxes if they are already taxed in the country of origin. However, this exemption is valid only until 31 December 2026.
Key deadlines to take note
The deadline for filing income tax in Malaysia varies is based on the type of form being submitted:
- BE Form (for residents who do not carry on a business):
- Manual filing: 30 April 2024
- e-Filing: 15 May 2024
- B Form (for residents who carry on business):
- Manual filing: 30 June 2024
- e-Filing: 15 July 2024
Meeting these deadlines is crucial to avoid penalties and ensure a timely submission.
How do I file my income tax?
Now, we’ve come to the part that everyone’s asking about: how exactly should I file my income tax, especially if it’s my first time? All you need is to follow these steps:
For first-timers, here are two prerequisites that you need to be aware of:
- Income Tax Number: This indicates that you are a registered taxpayer. You can obtain this by registering on e-Daftar, accessible via LHDN’s one-stop portal, MyTax.
- One-time PIN for e-Filing: This is needed to submit your Income Tax Return Form (ITRF) through the e-Filing platform. You can obtain the PIN either online or by visiting an LHDN branch.
Obtaining your Income Tax Number:
- Registration Process:
- Via e-Daftar: Requires only a scanned MyKad.
- Visit LHDN office: Requires a copy of MyKad or equivalent, salary slip/EA/EC, and marriage certificate (if applicable).
- Notification: LHDN will email your income tax number within 3 working days, or you can check it via e-Daftar or contact the LHDN office hotline.
Registering for a Digital Certificate and One-time PIN for E-Filing:
- Process:
- Register at MyTax portal using e-KYC (face identification on mobile phone) or e-CP55D (online form on website). Alternatively, visit the LHDN office and register using CP55D paper form.
- Activation: Click on the activation link sent to your registered email address for your digital certificate.
- One-time PIN: Automatically displayed upon logging in to your MyTax account.
Once you’ve completed these steps, the next thing you need to do is to fill up the tax form accordingly and hit the ‘Submit’ button.
To sum up, paying taxes in Malaysia isn’t just a rule you have to follow—it’s a duty we all share and a way to do our part for society. By paying taxes, we help uphold the law, promote fair development, and make sure everyone gets the services they need.
READ ALSO:
