How to Calculate Income Tax in Malaysia

If you are not sure how to calculate income tax in Malaysia, the good news is that you can find a wide range of guides and resources to help you. One of the best things to do is to find a reputable and trusted accounting and tax services firm to help you comply with your tax obligations. We at Accounting Services Hub offer reliable and professional assistance to facilitate your Malaysian income tax filing, calculation, and so much more.

There are various points to remember before you comply with your tax filing obligations. Our tax services are designed to provide ways to help and share with you information about this important tax obligation. Before knowing how much you need to pay for your taxes, there are two things you need to know and understand about tax rates:

1. Progressive – Tax rates in Malaysia are progressive which means taxpayers only need to comply with payment of the higher rate on top of the value above that rate. This means that a taxable person will not have less “net income after-tax” through generating more income.
2. Chargeable Income – This type of income is only calculated after tax deductions and reliefs. Chargeable income for companies is not the accounting net income because the tax deduction rules and accounting accrual rules may vary. Similarly, chargeable income for individuals is not the monthly take home salary income because the individual is entitled to claim for tax exemptions and tax reliefs.

Tax rates are effected on the chargeable income of the taxpayer instead of the total income or accounting net income. The following equation will help you calculate your chargeable income in Malaysia:

Chargeable Income = Gross Income – Tax deductible Expenses – Tax Exemptions – Tax Reliefs

Applying this formula on an actual figure for an example, you will get this equation:

RM55,000 (Gross Income) – RM9,000 (Taxable deductible expenses) – RM2,000 (Tax Exemption – RM4,400 (Tax Relief) =  RM39,600 (Chargeable Income)

There are updated guides to help you calculate and determine your income tax rate for the current year. First, you need to know if you are a Malaysian tax resident. Then you need to have proper accounting records to substantiate your gross income figure. Next, you need to apply the correct tax deduction rules to your expenses to ensure that you claim tax deduction accurately to avoid tax compliance issues. Besides that, you also need to apply the correct tax exemptions and tax reliefs, and then fill in the income tax form accurately for submission to Lembaga Hasil Dalam Negeri (LHDN). Why go through this meticulous and difficult task if you can easily hire a competent accounting and tax services firm to do it for you?

The services we offer go beyond just calculating how much you need to pay for the next filing and payment deadline. We can help you to claim accurate tax deductions and reliefs to save a significant amount of money for the each taxable year. To file your taxes can be more complicated than you imagine, but we make this task easier because we have a team of experienced professionals to account for your income taxes accurately. Besides that, we can advise on tax saving strategies to reduce your tax rate bracket and can also help you to file your tax returns. You can fully maximize our value added services by engaging us to help you. Choose the stress-free and worry-free tax filing and calculation option. Entrust your tax concerns, whether personal or business, in the hands of the experts in Accounting Services Hub.