As 2024 comes to a close and the time to file your income tax returns comes around again, what reliefs can you claim to reduce the amount of tax you end up having to pay? Thanneermalai Somasundaram, Managing Director of Thannees Tax Consulting Service, shares some tips and reminders with us.

Image Credit: Shutterstock.com

Presenter: Shazana Mokhtar, Keith Kam
Producer: Keith Kam, Natalie Tan, Tun Hizami Hashim

Podcast Transcription

Shazana Mokhtar:
Now, as the year comes to a close, it's time to collect our receipts and tabulate them for the upcoming tax filing season. The federal government expects public revenue to reach a new record high of nearly RM340 billion in 2025, driven by increases in both direct and indirect tax collections.

Keith Kam:
According to the Finance Ministry's 2025 Fiscal Outlook and Federal Government Revenue Estimates, the projected growth in tax collection next year will be supported by sustained economic growth.

Of the total tax revenue, individual income tax is expected to increase by 7.8% to RM44 billion, in line with Malaysia's stable job market and improved wages, particularly the salary increases for civil servants. Although wages are increasing, do you still struggle to make ends meet? Before you can budget your expenses, a significant portion of it has already been taken away by the Inland Revenue Board, also known to us as LHDN.

Shazana Mokhtar:
Which is why you should take advantage of the various tax relief measures that have been provided by the government to help us unpack these tax incentives.

We have on the line with us Thanneermalai Somasundaram, Managing Director of Thannees Tax Consulting Services. Thannee, good morning. Thank you very much for joining us.

Let's start off with what we should be getting ready as we prepare for the tax filing season. What should all good taxpayers have in hand in the just over two months that we have before filing season starts?

Thanneermalai:
Well, thank you very much. And thank you very much for inviting me.

I think the first thing is the tax returns have not come out yet. They usually come out in March. But what's most important is that over the next couple of days, you have an opportunity—from today until the 31st—because you have reliefs that you should take advantage of.

For example, what I want to highlight is lifestyle relief of RM2,500 for books, journals, computers, phones, and self-enhancement skills. Then for sports, you have another RM1,000 to spend on sports equipment if you haven't—no sports attire, but it includes gym memberships and any kind of equipment that you might need.

For medical, you have got RM10,000. If you haven't taken your tests, there's relief for vaccinations, complete medical examinations, and a whole bunch of others—even dental. Dental treatment is limited to RM1,000. You should use it. If you haven't gone, go to the dentist quickly!

Then for PRS, you've got another few days to claim your RM3,000 relief if you're putting money into Private Retirement Schemes. For life assurance, you should have paid RM3,000, and for SSPN, up to RM8,000, and so on.

So that's the first thing. The second thing you should be doing is gathering those records and keeping them, because you need the receipts in your name. If your wife is spending on your behalf, you just have to note down who is going to use that equipment on the receipt.

Basically, that's what you need to get ready with your records. You have an opportunity over the next couple of days to actually maximise your reliefs. Don't lose it!

Ketih Kam:
Thanks for the reminder, Thannee. I just remembered I bought my mobile phone this year.

Anyway, a lot of the incentives we heard in Budget 2025 that came out in October cover the 2025 Year of Assessment, so this doesn't count towards those. But for 2024, what I do remember is this relief for education expenses of RM7,000. What are the details for this? How do we show proof of this?

Thanneermalai:
You basically have to register with an organisation that has been approved or recognised by the government—approved by the minister through the Ministry of Higher Education. This RM7,000 relief is for tertiary education for those undertaking master's or doctorate degrees.

If you are just upskilling yourself, then you get a RM2,000 relief. The RM7,000 is strictly for tertiary education master's degrees. What you need from the university is confirmation that you are a student—the necessary student letters or certificates—along with proof that you paid for it, so you've got to show the receipts. That's about it. There's nothing difficult about it, but you need to be in an institution recognised by the government and approved by the Minister of Higher Education.

Shazana Mokhtar:
You mentioned upskilling courses there, Thannee. Can I just tease that out? Would it include things like online courses on Coursera? Or, for example, if you sign up for a MasterClass subscription, does that count as upskilling that we can get relief from through tax exemptions?

Thanneermalai:
For upskilling, it has to be recognised by the Director General of Skills Development. So if that course is recognised by the Director General of Skills Development under the National Skills Development Act 2006, then you are entitled to claim the RM2,000.

Otherwise, no—you can't just register yourself for any online courses and claim the RM2,000. Unfortunately, there is a bureaucracy to deal with. You have to get approval through them, whereas going to a university or college to claim your RM7,000 is much easier.

Shazana Mokhtar:
We also know that electric vehicles are increasingly becoming more attractive. What is the income tax relief that can be enjoyed for them, if at all?

Thanneermalai:
Seriously, for electric vehicles, the only thing they've given at the moment is if you want to buy charging equipment for your home, etc. Up to RM2,500 can be spent, whether on hire purchase, outright purchase, or a facility subscription, and you will get a deduction.

Otherwise, for the individual, you're not going to get anything extra beyond buying the car and whatever indirect tax effects apply to that car. So at the moment, it's RM2,500 for the equipment needed for your personal vehicle's charging facility.

And remember, it mustn't be used for business. You mustn't buy the vehicle and use it for business purposes—if it's for your personal use, you can claim the RM2,500 deduction.

Keith Kam:
Looking ahead, in Budget 2025, there was an announcement of an income tax at the rate of 2% to be imposed on dividend income received by individual shareholders. How should we prepare for this? What sort of records should we start keeping when 1 January hits before it's time to declare this?

Thanneermalai:
This is very interesting, because you've only got a few more days to avoid the 2% tax if you wish to. By the 31st, you should declare the dividend. If you do it afterwards, you are going to pay 2% on dividend income in excess of RM100,000 for individual shareholders.

The records are very simple: you need to keep the dividend vouchers and show proof that you received the money. I expect that when the new Form B and Form BE come out, they will ask you to declare the total amount of dividends received. Gone are the days when you could ignore dividends. Now, you have to keep track of your dividends to show whether you are below or above the RM100,000 threshold. If you are above RM100,000, the 2% tax will kick in.

Nowadays, everything is self-assessment, so the buck stops with you. They pass responsibility back to you rather than monitoring it themselves. That's the trend across Malaysia and around the world—more taxes like Real Property Gains Tax and Stamp Duty are moving into self-assessment.

Coming back to the 2%, I'll tell you something quickly that people can do in the next couple of days. This is legitimate advice and very simple: make sure the company—usually private, family-owned companies, because public listed companies require board approval for final dividends (or board approval for interim dividends)—checks its figures before 31 December.

Private companies have the flexibility to do this quickly, provided you check two things:

Make sure the company has sufficient retained earnings.

Pass the solvency test. After paying the dividend, the company must remain solvent and able to pay off its creditors. Capital must not be impaired, and the company should remain solvent for the next six months.

If you meet those conditions, you can distribute or credit the dividend by 31 December to avoid the 2% tax. Today is Boxing Day, 26 December, so we literally have a couple of days if you wish to act and are sitting on a lot of retained earnings. That is one legitimate way of taking profits out without paying the 2%. But don't get it wrong—if you get it wrong and become insolvent, you will be in trouble under company law.

Shazana Mokhtar:
Very quickly, Thannee. We did see Putrajaya introduce an indirect taxes voluntary disclosure and amnesty programme between June 2023 and May this year. Is this something taxpayers should bank on for the coming year?

Thanneermalai:
It is becoming quite frequent—they did it in 2018, 2021, and indirect tax amnesties ran up to February 2023. Technically, there is no special programme right now, but we have a ongoing programme called AViP (Audit Verifikasi Pematuhan), which is a compliance audit.

They will review your case if you go to them. It is available now and will continue into next year. You can bring your issues to them, but remember: they will audit you. This time around, they won't just take the money; they will audit you and reach an agreement. If they agree with your submission, there will be no penalties. If they don't, additional taxes will be payable.