If you’re earning more than RM6,000 a month, you could significantly reduce your taxes by leveraging the personal income tax reliefs available in Malaysia. From PRS Malaysia contributions to EPF Malaysia and SOCSO contributions, here’s how you can save up to RM570 or more in taxes for the year of assessment 2024.
1. What is PRS Malaysia?
PRS (Private Retirement Scheme) is a voluntary long-term savings and investment plan designed for retirement. It offers attractive tax relief benefits while helping individuals secure their financial future.
- Key Advantages:
- Tax deduction up to RM3,000.
- Open to individuals aged 18 and above.
- Low minimum initial contribution (e.g., RM100 for certain PRS providers).
- Example of Tax Savings:
- If your chargeable income is RM72,000, at a tax rate of 19%, a RM3,000 PRS contribution saves you RM570.
- For a chargeable income of RM120,000, at a tax rate of 25%, the savings amount to RM750.
2. Comparing PRS Malaysia and EPF Malaysia
Understanding the difference between PRS Malaysia and EPF Malaysia can help you make informed decisions to maximize personal income tax relief.
Feature | PRS Malaysia | EPF Malaysia |
Managed by | Private Pension Administrator (PPA) | Employees Provident Fund (EPF) |
Tax Relief | Up to RM3,000 | Up to RM7,000 (RM4,000 + RM3,000) |
Return Guarantee | Not Guaranteed | Guaranteed minimum 2.5% |
Fee Structure | Sales charge up to 3%, annual fees up to 2% (Fees may vary across PRS providers) | No charges |
- Contributions to PRS Malaysia and EPF Malaysia both qualify for personal income tax Malaysia reliefs, providing flexibility for diverse retirement planning needs.
3. SOCSO Contributions and EIS Contributions
SOCSO contributions and EIS contributions are eligible for tax relief up to RM350. These contributions are aimed at providing social security and employment insurance benefits.
Deductions are allowed for SOCSO contributions and EIS contributions made by employees. These contributions help protect against employment-related risks.
How to Claim:
- Details of your SOCSO contribution and EIS contribution are available on Form EA, provided by your employer.
4. Maximize Contributions to Skim Simpanan Pendidikan Nasional (SSPN)
- Relief Amount: Up to RM8,000
- Deposits into an SSPN account for your child’s education can significantly reduce your personal income tax in Malaysia. The allowable deduction is based on the net amount deposited, excluding any withdrawals.
- Example Calculation:
- Total Deposit: RM2,000
- Total Withdrawal: RM1,500
- Allowable Deduction: RM500
- Example Calculation:
- Important Notes:
- Spouses assessed separately can each claim up to RM8,000 if they open separate accounts for the same child.
- This tax relief is effective until the year of assessment 2024.
(From YA2025 onward, the claim can only be made by either parent for SSPN savings, with the maximum claim limited to RM8,000)
5. Utilize Insurance Premiums for Education or Medical
- Relief Amount: Up to RM3,000 (Effective from YA2025: Up to RM4,000)
- Premiums paid for medical or education insurance policies for yourself, your spouse, or children qualify for personal income tax Malaysia relief.
- Criteria for Medical Policies:
- Covers medical treatment for diseases, accidents, or disabilities.
- Coverage must be for a minimum of 12 months.
- The policy can be stand-alone or a rider to a life insurance policy (only rider premium qualifies for deduction).
- Dreadful disease riders are allowed as a deductible.
- Group medical policies where the employee pays the premium also qualify.
- Premiums for waiver benefits or travel insurance do not qualify.
- Criteria for Education Policies:
- Must benefit a child who is the nominee or insured.
- For takaful policies, the parent must be the participant, and the policy proceeds must be made as a hibah to the child.
- Maturity proceeds must be payable when the child is between 13 and 25 years old.
Conclusion: Utilize PRS Malaysia, EPF Contributions, SOCSO Contributions and More
By strategically leveraging PRS Malaysia, EPF Malaysia, SOCSO contributions, and other available reliefs, you can optimize your personal income tax savings for YA 2024. Whether saving for retirement or planning for future security, these tax relief options provide a win-win opportunity to grow your wealth while reducing your tax burden.
How YYC taxPOD Can Help Businesses in Malaysia
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Empowering Your Tax Planning with YYC taxPOD: Your Guide to National Budget 2025 Malaysia
The Budget 2025 introduces significant changes to the country’s economic and tax policies, focusing on growth, sustainability, and the well-being of its citizens. A standout measure is the implementation of a dividend tax Malaysia, which imposes a 2% tax on dividend income exceeding RM100,000 annually. This marks a major shift from the previous full exemption on dividend income and is a key area of focus for taxpayers.
To help individuals and businesses adapt to these changes, YYC taxPOD, Malaysia’s premier tax e-learning platform, has created a comprehensive guide – Budget 2025 Malaysia. This guide breaks down the new tax policies and grants, equipping you with the knowledge needed to navigate the evolving tax landscape effectively.
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