Income Tax Malaysia: What’s New For YA 2021?
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The government has introduced several new income tax reliefs for the new year of assessment (YA) 2021, as well as revamped some of the existing ones. There were also several special tax measures from YA 2020 – rolled out as a form of assistance during the Covid-19 pandemic – that were further extended into YA 2021 (and even beyond).

Here, we’ve listed the various updates that you will come across as you fill out your income tax for YA 2021; be sure to keep an eye out for them so that you do not miss out on them.

New tax initiatives for YA 2021

Tax reliefs

Increased tax relief for medical expenses (self)

The government has raised the total amount that you can claim for various medical expenses for yourself, spouse, or child in YA 2021 – from RM6,000 to RM8,000. This includes payments for:

  • Treatment of serious diseases, including heart attack, pulmonary hypertension, cancer, Parkinson’s disease, and others
  • Fertility treatment for self or spouse, including intrauterine insemination (UI) treatment, invitro fertilisation (IVF), and others
  • Vaccination expenses, including pneumococcal, human papillomavirus (HPV), Covid-19, and others
  • Complete medical examination (with a new sub-limit of RM1,000)

The government has also expanded the scope of expenses that you can claim for the “Complete medical examination” category, which you can read on below.

Inclusion of Covid-19-related expenses for medical expenses (self)

(Image: The Edge Markets)

Under the “Complete medical examination” category allowed for medical expenses (self) – which has a sub-limit of RM1,000 out of the overall RM8,000 – you are now also allowed to claim Covid-19 detection test expenses. These include fees for tests conducted in clinic or hospitals, as well as the purchase of self-detection test kits at pharmacies and other permitted channels – which means this will cover both PCR and RTK tests that you may purchase over the course of the year.

This tax initiative was announced under the PERMAI stimulus package back in January 2021, and has been made effective for YA 2022 and 2023 as well.

The sub-limit for this category used to be RM500 in previous years, but was doubled to RM1,000 under Budget 2021.

Revamped criteria under tax relief for medical, special needs, and carer expenses for parents

In YA 2020 (and previous years), individual taxpayers were allowed to claim up to RM5,000 for medical treatment, special needs, and carer expenses for their parents; or a separate RM1,500 per parent if they did not make any claims under medical expenses for parents.

For YA 2021, the government has removed this sub-criteria. Instead, you’re now allowed to claim up to RM8,000 only for medical treatment, special needs, and carer expenses incurred under your parents. These expenses include medical care and treatment provided by a nursing home, as well as non-cosmetic dental treatment.

Be sure to keep the receipts of these expenses. In the case of making claims for medical treatment, special needs, and carer expenses, you should also possess evidence from a registered medical practitioner proving that your parents are in need of such facilities. If possible, obtain a copy of the certification or work permit of the carer as well.

Upskilling courses included in tax relief for education (self)

(Image: Microsoft)

The RM7,000 tax relief for education was originally allowed for fees expended on Masters or Doctorate degrees, and any course of study up to tertiary level undertaken for law, accounting, Islamic finance, technical, vocational, industrial, as well as scientific or technological skills and qualifications. Of course, these must be offered by institutions or professional bodies that are recognised by the Ministry of Higher Education Malaysia.

For YA 2021, the government has expanded the qualifying expenses to also include courses that are undertaken for the purpose of upskilling or enhancing yourself, provided it is recognised by the Director General of Skills Development under the National Skills Development Act 2006 (Act 652). That said, a sub-limit applies; you can only claim a maximum of RM1,000 for this category of education in YA 2021.

The government has also stated that this sub-limit will be increased to RM2,000 for YA 2022 and YA 2023.

RM500 tax relief for sports-related expenses

sports equipment-badminton
(Image: AsiaOne)

An additional RM500 tax relief has been introduced for sports-related expenses, on top of the general RM2,500 lifestyle tax relief that includes the purchase of sports equipment (as well as other lifestyle expenses, such as books, electronics, and internet subscriptions). This means that you can technically claim a total tax relief of RM3,000 for sports-related expenses if you wish.

This relief is applicable to purchases made for yourself, spouse, or child that meet the following criteria:

  • Sports equipment for sports activities listed under the Sports Development Act 1997 (excluding motorised two-wheel bicycles)
  • Rental or entrance fees to any sports facilities
  • Registration fees for any sports competition where the organiser is approved and licenced by the Commissioner of Sports under the Sport Development Act 1997

This tax relief can be traced back to a proposal from the Ministry of Youth and Sports back in 2020, who had originally asked that a dedicated tax incentive be introduced for the purchase of sports equipment and parents’ investment for their children in sports under Budget 2021.

Increased tax relief for disabled spouse

The tax relief provided for a disabled spouse has been increased from RM3,500 in YA 2020 to RM5,000 in YA 2021.

Others

Reduced income tax rate for resident taxpayers in RM50,001 to RM70,000 band

Under Budget 2021, the government has reduced the tax rate for individual taxpayers who fall under the RM50,001 – RM70,000 band (chargeable income) by one percent, from 14% to 13%. This is a move to assist the middle-income (M40) group, said the government – especially as households are still grappling with the economic fallout from the pandemic.

Special tax measures/incentives extended from YA 2020

Tax reliefs

Special RM2,500 relief for personal computer, smartphone, or tablet

(Image: Malay Mail/Shafwan Zaidon)

You can claim up to RM2,500 in lifestyle relief for the purchase of a personal computer, smartphone, or tablet made during 2021. This is on top of the existing RM2,500 relief offered on the purchase of a personal computer, smartphone, or tablet under the lifestyle category – which also includes purchases of books, sports equipment, and monthly internet bills.

LHDN shared an example to illustrate how this relief works: if you bought a smartphone worth RM2,000 in March and a laptop worth RM4,000 in July, you can claim up to the maximum amount offered under these two tax reliefs. Under the additional tax relief, you can claim up to RM2,500 for the purchase of the laptop. And under the general lifestyle tax relief, you can claim RM2,000 for the smartphone, and another RM500 from the purchase of the laptop – this allows you to fully utilise both reliefs. Note that since this example was shared by LHDN themselves, it is confirmation that you can indeed stack both reliefs if the electronic device purchased is priced above RM2,500.

Additionally, for both categories of relief, the device must be either for your own use or the use of your spouse or child. This relief cannot be claimed if you buy the device for business purposes, and the relief does not include any additional charges for warranty.

This additional special tax relief was initially introduced for YA 2020 as part of the government’s efforts to assist work from home arrangements due to Covid-19. It was then extended to 31 December 2021. During the tabling of Budget 2021, it was announced that this special relief will be extended for a second time, until 31 December 2022.

Special RM1,000 relief for hotel accommodation, tourist attractions, and tourism packages

You can claim up to RM1,000 in tax relief for your stay at hotels or accommodation premises and entrance fees to tourist attractions for individuals. To qualify for this relief, the accommodation premises must be registered with the Commissioner of Tourism; you can find the list of the registered premises here. As of January 2021, the scope of this relief has also been expanded to include expenses incurred from the purchase of tourism packages through MOTAC-registered local travel agencies.

Similar to several other special tax reliefs, this tax initiative was also initially announced for YA 2020 under the Economic Stimulus Package 2020, aimed at boosting the tourism sector. It was originally applicable only for payments made between 1 March 2020 to 31 August 2020, but was subsequently extended to 31 December 2021. Under Budget 2022, it was extended for the second time to include YA 2022 as well.

Increased childcare tax relief at RM3,000

The limit for income tax relief for childcare services expenses is raised from RM1,000 to RM3,000. This was also introduced much earlier for YA 2020 under the PENJANA Economic Recovery Plan as an initiative to help boost work from home arrangements during the pandemic – and was eventually made available for YA 2021 as well. Under Budget 2022, it has been further extended to YA 2023.

Tax deductions/exemptions/others

Tax deductions for Covid-19 donations and contributions

Donations and contributions in kind given to fight the Covid-19 pandemic have been officially classified as tax deductible since February 2020, and will remain so until the government declares it is over. According to the Inland Revenue Board (LHDN), cash and contributions in kind to the Ministry of Health’s Covid-19 Fund, as well as cash donations to the National Disaster Management Agency’s (NADMA) Covid-19 Special Aid Fund and other approved organisations are eligible for tax deductions.

For personal income tax filing, you can claim up to 10% of your aggregate income for Covid-19 Fund contributions and other eligible donations.

RPGT exemption for sale of residential properties

(Image: The Malaysian Reserve)

Malaysians who wish to sell their residential properties during the period between 1 June 2020 to 31 December 2021 will be entitled to a real property gains tax (RPGT) exemption. This exemption is limited to three residential properties per individual for the whole exemption period. Under Budget 2022, the government took this one step further by abolishing the RPGT for the sale of properties from the sixth year onwards (originally set at 5%).

This RPGT exemption was announced as part of the PENJANA Economic Recovery Plan in June 2020 to stimulate consumer sentiment in the housing market.

Increased tax exemption limit for compensation for loss of employment

(Image: Malay Mail/Shafwan Zaidon)

Individuals who received compensation due to loss of employment are also taxable, but may be exempted under two conditions:

  • 100% tax exemption for loss of employment due to ill health
  • Tax exemption of RM10,000 for each full year of employment with the same employer or companies from the same group

However, for YA 2020 and YA 2021, the tax exemption of RM10,000 has been temporarily increased to RM20,000 for each completed year of service with the same employer (or any of its subsidiaries).

***

Now that you know what the new tax reliefs, exemptions, and deductions are – along with the extended special tax initiatives – make sure to claim for them in your income tax form if you are eligible. Stay tuned as well for our comprehensive YA 2021 guide on filing income tax, where we’ll cover all the essentials that you need to know about filing income tax. In the meantime, you can check out all income tax-related articles here.

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