9th November 2020 - 3 min read
The proposed national Budget for the year 2021 contained a number of interesting income tax initiatives that you should be aware about. From expanded medical tax reliefs to an anticipated income tax reduction, here are the personal income tax highlights from Budget 2021.
Resident individuals who are within the chargeable income band of RM50,001 to RM70,000 will enjoy a 1% income tax reduction. This income tax reduction is estimated to benefit 1.4 million taxpayers.
To encourage Malaysians to seek vaccination as a preventative measure against disease, the scope of the tax relief for medical treatment expenses will be expanded to cover vaccination expense. According to the finance minister this would include pneumococcal, influenza, and Covid-19 vaccinations and is given on vaccination expenses for the taxpayer, spouse, and child, limited up to RM1,000.
The tax relief limit for medical expenses for self, spouse, and child for serious diseases will be increased from RM6,000 to RM8,000. Of this amount, the tax relief sub-limit for expenses on a full medical check-up will be doubled from RM500 to RM1,000.
Previously, the tax relief limit for Medical treatment, special needs, and carer expenses for parents was set at RM5,000. It has now been increased to RM8,000.
The tax relief limit for lifestyle expenses has been increased from RM2,500 to RM3,000. However, the additional RM500 is specifically provided for expenditure related to sports, including participating fees for sports competition. Currently, the category of lifestyle purchases for self, spouse, or child include publications; personal smartphone, computer, or tablet; sports equipment for sports activities and gym membership; and Internet subscription. The scope of relief will also be expanded to include subscription of electronic newspapers.
The income tax relief of up to RM3,000 on private retirement scheme (PRS) contributions will be extended until YA 2025. According to the government, this is to further encourage old-age savings amongst Malaysians.
The income tax relief for Skim Simpanan Pendidikan Nasional (SSPN) will be extended until YA 2022. The tax relief of up to RM8,000 on net annual savings in SSPN will be continued to further encourage parents to save for financing tertiary education of their children.
The government is proposing that the income tax exemption limit for compensation for loss of employment be increased from RM10,000 to RM20,000 for each full year of service. This initiative is suggested for YA 2020-21 and is meant to assist taxpayers who have lost their jobs due to the current economic condition arising from Covid-19.
Individual taxpayers with a disabled spouse will be given an additional tax relief limit of RM5,000 from RM3,500 previously.
What are your thoughts on the new tax initiative proposed in Budget 2021? Let us know in the comments below! You can also stay up to speed on the main key highlights of the Budget overall by referring to our handy infographic here.
Subscribe to our exclusive weekly newsletter and we’ll bring you the week’s highlights of financial news, expert tips, guides, and the latest credit card and e-wallet deals.
Stay tuned for what’s to come next in the personal finance world