Navigating Income Tax and Insurance Tax Relief in Malaysia

Failure to pay your taxes may result in hefty fines or even jail time as stipulated in the Income Tax Act of 1967. Generally, the mandatory tax deductions set by your employer, such as the Monthly Tax Deduction (MTD) would have already covered your income tax payments for the year. For those who have a secondary income or run their own businesses, the Inland Revenue Board of Malaysia (IRB) allows you to pay your taxes via:

• Online payment on the IRB website

• IRB Malaysia counters

• Banks and/or Pos Malaysia outlets

• ATM

Tax relief is a deduction made to your chargeable income for certain activities or behaviours that the government encourages. With good planning, and depending on your lifestyle, you can reduce your chargeable income and save a significant amount of taxes with tax reliefs set by the government. These are some of the groups who are entitled to tax relief:

• Single individuals

• Married couples with parents

• Parents with children 

This tax relief is one of the largest reliefs that you are entitled to, but the claimable amount is dependent on the specific insurance policy you hold. Here’s a brief guide on the types of insurance policies and what is claimable under them:

Pensionable public servants are entitled to tax relief of up to RM7,000 for their life insurance premium payments but they are not eligible for any EPF relief. On the other hand, private sector employees who contribute to EPF receive a maximum relief of RM3,000 for their life insurance policy and are entitled to an additional RM4,000 as part of their EPF relief allocation.

Tax relief related to education or family medical insurance policies for you, your spouse, and child is limited to RM3,000. This limit also applies when your child is a beneficiary of the insurance policy. In cases of critical illness, you’ll be allowed to claim up to 60% of your premium as medical reimbursement.

For both PRS and Deferred Annuity, you’re entitled to a combined tax relief of RM3,000, which is provided until the year of assessment 2025 as part of the national budgets over the years.

Under the lifestyle category, a restricted sum of RM2,500 is also claimable for items such as:

• Reading material

• Sports equipment and gym membership fees

• Personal electronic devices

• Internet subscriptions

The deadline for income tax filing is on April 30 every year. Preparing in advance by familiarising yourself with claiming procedures and the eligibility criteria can ensure that your taxes are filed on time—avoiding any penalties for late filing. Tax reliefs are usually announced during the yearly budgets and staying informed about these updates enables you to maximise potential relief for greater tax savings. For further information, visit the IRB website where you can access their comprehensive tax relief listing or contact them via their hotline at 03-8911 1000.