Guide to tax relief and takaful: planning successful financial management

The month of March is just around the corner and an important month for all employees in Malaysia: tax filing and declaration season. But, did you know that you can receive tax relief or exemption through your takaful plan? True, you can reduce your charged income tax and help you stay prudent. Let's explore the characterisation of tax relief and how to do tax relief through takaful.

1. Defining tax relief

What is tax relief? Tax relief is an event in which there is a reduction of money from one’s total yearly income, according to the assessment year. Majority of Malaysians are still confused about the difference between tax relief and tax deduction. It is simple, tax relief is when your taxes are reduced from your yearly income, where you have used the money for specific purposes, however tax reduction is the monthly tax deduction deducted from the employee’s current monthly salary by the employer.

Both of these reduction of taxes gives the same function: lighten the burden of the workers in Malaysia to pay the taxes that are imposed when the tax is calculated. Hence, it is important to be aware of any year-round payments and transactions that have been made so that we can make a good financial plan and at the same time save up for your tax payments later.

2. Tax relief eligibility

So, what are the eligibility criteria to make a tax relief claim? There are three main groups of eligible Malaysian citizens for tax relief namely:

●       Those who are not married
●       Those who have a child.
●       Married couple who support their parents

There are various categories that you can include in your tax relief list such as education fees, medical costs and goods or services under the lifestyle category such as printed reading materials, sports equipment costs and gym membership fees, purchases of gadgets such as computers and phones and monthly internet bills. The maximum limit of tax relief for the lifestyle category is RM2,500. Other than that, you can also claim your tax relief through your choice of insurance or takaful, based on the terms and conditions set by your insurance or takaful company. Hence, you can start tracking back all of the payments that you’ve done to make a tax relief claim.

3. How to claim tax relief through takaful 

Did you know, you can claim your tax relief through takaful? True, you are actually eligible when you qualify for personal tax relief when you enrol in any takaful plan.

If you are a retired government employee, you are eligible for receiving tax relief up to RM7,000. Meanwhile if you are a private employee, you can claim up to RM3,000 for certain takaful contributions and RM4,000 for KWSP or EPF. Medical plans and education also fulfil the qualification for limited tax relief up to RM3,000. Not only can you save up from paying your income tax, you can also enjoy the benefits of takaful provided for you.

Here are the steps to claim tax relief through takaful:

1.      Register your income tax number (online at LHDNM website or the nearest LHDNM office to you). Please prepare:

-        CP600 form (download in the website from the “Borang” section)

-        Identification card

-        Business Registration Certificate (if any)

-        Payslip/income statement

2.      Get a HASiL MyTax pin number (online via HASiL Customer Feedback or a nearby HASiL branch). Please prepare:

-        A copy of your identification card/passport

-        CP55D Form - Individual E-Filing Pin Number Application

3.      Log into MyTax website.

4.      Fill in your personal details and employer information.

5.      Declare your annual income.

6.      Fill in the details for you to claim your tax relief.

The reliability and financial protection are both important aspects of one's financial journey. By planning wisely and taking advantage of opportunities, you can build a solid foundation for achieving your financial goals. Make sure you declare your income tax on time, and update your tax exemption through your takaful plan!