For the year of assessment (YA) 2020, quite a number of new income tax reliefs and changes have come into force. Some of these were introduced as permanent additions via the national Budget, while some were announced later as part of Covid-19 pandemic relief packages.
When you file your taxes each year, it is always important that you do not miss out on any changes that are introduced for the new assessment year. Therefore, take a look at what’s new when it comes to filing your income tax for YA2020 compared to the year before.
Additional RM2,500 relief for personal computer, smartphone, or tablet
You can claim up to RM2,500 in lifestyle relief for the purchase of a personal computer, smartphone, or tablet made between 1 June 2020 and 31 December 2020. 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.
In an example given by LHDN, 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.
Do note that 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.
In June last year, the additional special tax relief was introduced for YA2020 as part of the government’s efforts to boost work from home arrangements due to the Covid-19 pandemic. It was then announced this year that the special tax relief would be extended to 31 December 2021. However, it is not entirely certain yet whether those who claimed the relief for YA2020 would also be able to claim it for YA2021; it is likely that LHDN will provide further clarification on this next year.
Special RM1,000 relief for hotel accommodation and tourist attractions
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. This relief is for payments made between 1 March 2020 and 31 December 2021.
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.. This new tax relief was announced in February 2020 to help stimulate the tourism sector under the Economic Stimulus Package 2020.
Childcare tax relief increased to RM3,000
For YA2020 and YA2021, the limit for income tax relief for childcare services expenses will be increased from RM1,000 to RM3,000. This was introduced under the PENJANA Economic Recovery Plan as an initiative to help boost work from home arrangements during the pandemic.
Fertility treatment included under medical expenses tax relief
You can now claim expenses for fertility treatment under the tax relief for medical expenses of up to RM6,000. This includes Intrauterine Insemination (IUI) treatment, In vitro fertilization (IVF), or any other fertility treatments including consultation fees and medicines.
In order to qualify for this relief, you need to be a married individual and you can claim for fertility treatment for yourself or your spouse. You can deduct up to the amount expended up to RM6,000; this RM6,000 restriction is shared across claims for medical expenses on serious diseases as well as complete medical examination for yourself, spouse, or child.
Increase of tax deduction for donations from 7% to 10%
The restriction on the tax deduction allowed on certain donations and contributions has been increased from 7% to 10% of the individual’s aggregate income, starting from YA2020. This restriction is applied to:
- Gifts of money to approved funds, institutions, or organisations;
- Gifts of money or cost of contribution in kind for any approved sports activity or sports body; and
- Gift of money or cost of contribution in kind for any project of national interest approved by Ministry of Finance.
Tax deductions for Covid-19 donations and contributions
Starting from February 2020, donations and contributions in kind given to fight the Covid-19 pandemic are officially classified as tax deductible – until the pandemic is classified over by the government. The Ministry of Finance has announced that cash and contributions in kind to the Ministry of Health’s Covid-19 Fund as well as cash donations to the Ministry of Disaster’s Covid-19 Fund 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
Malaysians who wish to sell their residential properties during the period between 1 June 2020 and 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.
This RPGT exemption was announced as part of the PENJANA Economic Recovery Plan in June 2020 to stimulate consumer sentiment in the housing market.
Tax exemption for employee receiving smartphone, tablet, or personal computer
Ordinarily, if you are given a smartphone, tablet, or personal computer by your employer as a gift, this could be considered as part of your income and thus open to taxation. For example, gifts of personal computers are ordinarily taxable for the amount of its market value, but there is a tax exemption for a gift of a mobile phone.
From YA2020, employees are exempted from having to pay personal income tax on the value of the benefit of a smartphone, personal computer, or tablet received from their employers, up to RM5,000. This was announced as part of the PENJANA Economic Recovery Plan. However, you cannot be a sole proprietor, partner, or employee who has control of the company to qualify.
New band of income tax for those earning above RM2 million
There is a new band of income tax introduced for those who earn more than RM2 million per year. This group will be taxed at a rate of 30%, two percentage points higher than the band below them. Previously, all those who earned more than RM1 million a year were taxed at 28%. The change was introduced during the tabling of Budget 2020.
Now that you know what the new tax reliefs, exemptions, and deductions are, make sure to claim for them in your income tax form if you are eligible. Stay tuned for our comprehensive YA2020 guide on filing income tax and find out everything that you should be claiming for to maximise your income tax returns!