Do you know how much you owe LHDN for income tax?
It’s ok, most people don’t. That’s why it’s a good idea to use an income tax calculator in Malaysia before submitting your actual income tax. This is good practice, whether you are a first-time taxpayer or if you have been doing your own taxes for a while.
There are a few income tax calculator in Malaysia but my favourite is KiraCukai.my. Simply input your data and it will automatically calculate your tax payable amount.
*Do note that the final amount may be different from your actual tax payable amount – so only use this tool to guesstimate rather than get the true figure.
This income tax calculator in Malaysia is pretty straightforward, but the accuracy of your income tax guesstimate (lol) depends on the data you provide, which admittedly contains a lot of variables.
However, the basics of it are:
- How much you earn – Your total income is your annual salary (plus benefits-in-kind, if any) or business profit (sales MINUS expenses) or both, combined.
- Note: Some sources of income are not subjected or partially subjected to income tax. Also, you may already pay income tax via PCB (Potongan Cukai Bulanan) – in which case, check if you’ve OVERpaid so you can get refund
- Learning which tax reliefs you can claim – see #2
- Deducting tax rebate, if any
Because there are a few areas to cover, I’ve divided this article into a compilation of guides covering most-asked questions on paying income tax. Let’s start with..
#1 – For First-timers (Basic Knowledge)
I’m listing here multiple guides and videos suitable for first-timers. Start here if you’ve never submitted income tax your whole life.
Opening your account for the first time:
- How to File Your Taxes for the First Time – RinggitPlus
- 2022 Malaysia Income Tax e-Filing Guide For Newbies – CompareHero
- Personal Income Tax e-Filing for First Timers in Malaysia – MyPF
How much is taxable income in Malaysia for Year Assessment 2021:
According to LHDN Income Tax Rates page, the chargeable income tax in Malaysia for Year Assessment 2021 follows the following table:
|Category||Chargeable Income (RM, Annual)||Calculations (RM)||Rate %||Tax (RM)|
|A||0-5000||On the First 5000||0||0|
|B||5000-20000||On the First 5000|
|C||20001-35000||On the First 20000|
|D||35000-50000||On the First 35000|
|E||50001-70000||On the First 50000|
|F||70001-100000||On the First 70000|
|G||100000-250000||On the First 100000|
|H||250001-400000||On the First 250000|
|I||400000-600000||On the First 400000|
|J||600001-1000000||On the First 600000|
|K||1000001-2000000||On the First 1000000|
|L||Exceeding 2000000||On the First 2000000|
Here’s how it works – let’s say your chargeable income for Year Assessment 2021 is RM80000. Your taxes are:
- The first RM70000 of your chargeable income (category F) = RM4400
- The next RM10000 of your chargeable income = 21% of RM10000 = RM2100
- Total tax payable = RM6500 (before minus tax rebate, if any)
Let’s do another example. Say your chargeable income for Year Assessment 2021 is RM65000. Your taxes are (before minus tax rebate):
- The first RM50000 of your chargeable income (category E) = RM1800
- The next RM15000 of your chargeable income = 13% of RM15000 = RM1950
- Total tax payable = RM3750 (before minus tax rebate, if any)
However, you don’t have to memorise all this 🙂 Simply use the income tax calculator in Malaysia that I recommended, KiraCukai.my and it’ll automatically give your income tax guestimate. This section only applies if you want to calculate your income tax manually.
#2 – Knowing all the tax reliefs that you may be eligible for in 2022
After you learned the basics, now you can optimise your income tax filings so you don’t need to pay more than you should. A resident individual is eligible for many types of tax relief.
Click here for the List of Tax Relief for Residential Individuals Year of Assessment 2021 by LHDN, or refer to the image below.
The majority of tax relief is more or less the same most years, but they might add on or adjust some categories, so you just have to keep yourself updated. For example:
- SSPN contribution used to be maxed at RM7000 – now it’s RM8000
- Payment for certain hotels – up to RM1000
- You can now claim up to RM1000 for vaccinations and RM1000 Covid-19 detection and vaccination
In any case, it’s good practice to know the tax reliefs applicable to you and keep the receipts for at least 7 years. Digital copy works too.
#3 – For very specific situations
Tax computation for sole proprietor in Malaysia (freelancers/self-employed):
Now, I mentioned earlier that business owners must declare business profit as income, which is your sales MINUS expenses.
If you have a business (even small scale or side hustles alongside main job), you MUST register it as a company if you want to claim business-related expenses. Depending on your nature of business, you can register as Sole Proprietorship, Limited Liability Partnership or Company.
For many small-scale online businesses in Malaysia, Sole Proprietorship (single owner) or Partnership (more than one owner) is enough, and the cheapest option.
(According to one tax professional, don’t do Sdn Bhd when you first start out. Only consider Sdn Bhd if you make more than RM150,000 per year (can get better tax rate).
- #DigitalCareers: How To File Your Income Tax As A Freelancer – CompareHero
- What Bloggers, Influencers and Freelancers Need To Know About Taxes in Malaysia – David Wang (I co-edited this)
- How to File Income Tax For Your Side Business – RinggitPlus
Tax computation for sole proprietor in Malaysia (other additional sources of income):
- If you earn from rental income – Remember To Claim Your Rental Income Tax Exemption – iMoney
- If you earn from trading (including crypto trading) – Active Cryptocurrency Traders Are Required To Declare Their Gains For Income Tax – RinggitPlus (Note: ALL active traders need to pay income tax, not just crypto traders. You trade stocks, trade forex, you pay)
Clarification and exemptions for employment income and benefits-in-kind:
If you are upper-management in MNC or similar, check if the perks you get from work are taxable.
Women returning to work after career breaks of at least 2 years are also exempted for up to 12 consecutive months.
- Employment Income section – PwC Malaysia
If you got audited:
If you get unlucky, and LHDN feels like something isn’t ‘right’ with your tax submission (or nonsubmission), they might audit you.
Zakat is a type of tax rebate.
#4 – Comprehensive Income Tax Guides
And last but not least, here are more in-depth guides for those who want to learn the different terminologies in greater detail. You don’t *need* to read these comprehensive guides to file your taxes, but they are great for supplemental information.
- 2021/2022 Malaysian Tax Booklet: Personal Income Tax – PwC
- Tax Filing 101 – Multiply by Creador Foundation
- Malaysia Personal Income Tax Guide – iMoney (image below)
Any other questions about income tax?
Are there any other questions not answered about paying income tax in Malaysia? Let me know in the comments section!
(If you have overly complicated questions, might as well ask LHDN yourself for the surest answer. Call the LHDN Hasil Care Line at 03-8911 1000 or email them from here)