Friday, July 22, 2011

Income Tax : Plan vs Not, how much difference ?

Income Tax, to plan or not to plan. Or more precisely, plan now before year end or only worry about it when you file tax next year ... How much is the difference actually ?

Says my annual income in 2011 will be $40,000. If I plan well now ie.
  • buy a $1,600 life insurance
  • pay $5,000 for my parent medication
  • buy $1,00 reading materials
  • ...
I would most probably end up paying $12 tax. That means I can most probably claim back quite a sum of money depends on how much my monthly tax deduction is.

On the other hand, if I do none of the above to optimize my tax, I will most probably be paying $937 for my tax. That is a difference of $925 !!

Will you be interested to earn or save $925 just by reading article like this to get yourself well aware of how you should spend some of your money which is beneficial to you and your family anyway ?

If you annual income is $60,000 the tax difference btw plan vs not is $1,991
If you annual income is $80,000 the tax difference btw plan vs not is $3,606

Annual Income $40,000.00


Best Case Min Case

1 Individu dan saudara tanggungan 9000 9,000.00 9,000.00

20 Insuran nyawa dan KWSP 6,000 (Terhad) 6,000.00 4,400.00 1600
2 Perbelanjaan Perubatan Ibu Bapa 5,000 (Terhad) 5,000.00 0.00 5000
5 Yuran Pendidikan (Sendiri) 5,000 (Terhad) 5,000.00 0.00 5000
7 Pemeriksaan perubatan penuh 500 (Terhad) 500.00 0.00 500
8 Pembelian buku, majalah, jurnal dan penerbitan 1,000 (Terhad) 1,000.00 0.00 1000
9 Pembelian komputer peribadi untuk individu 3,000 (Terhad) 3,000.00 0.00 3000
10 Tabungan bersih dalam skim SSPN 3,000 (Terhad) 3,000.00 0.00 3000
11 Pembelian peralatan sukan untuk aktiviti sukan 300 (Terhad) 300.00 0.00 300
12 Yuran langganan Jalur Lebar 500 (Terhad) 500.00 0.00 500
22 Insurans pendidikan dan perubatan 3,000 (Terhad) 3,000.00 0.00 3000
3 Peralatan Sokongan Asas 5,000 (Terhad)

4 Individu Kurang Upaya 6000

6 Perbelanjaan perubatan penyakit yang sukar diubati 5,000 (Terhad)

13 Faedah pembelian rumah … 10,000 (Terhad)

14 Suami/Isteri/Bayaran alimoni kepada bekas isteri 3,000 (Terhad)

15 Suami/Isteri kurang upaya 3500

16 Anak di bawah umur 18 tahun 1000

17 Anak menerima pendidikan sepenuh masa 1000

18 Anak diploma Ijazah 4000

19 Anak Kurang upaya 5000

21 Skim anuiti 1,000 (Terhad)

36,300.00 13,400.00

Taxable Income $3,700.00 $26,600.00

Tax Saving

Tax Payable $12.00 $937.00


Kris said...

If you have a very high income bracket, sometimes do this is not enough to offset the huge taxes you need to pay.

ChampDog said...

That is making assumption that you fully utilize the tax incentive. :)

Michael Tsen said...
This comment has been removed by the author.
Michael Tsen said...

yes, good point. something is in the making for a better analysis

Michael Tsen said...

Hi Kris, yes indeed. Actual tax optimization would require tax expert. Optimizing tax itself is a business on its own :D

the worst hit is usually the high level of middle income group, that's why when one's salary reaches certain stage, its better to setup a sole prop and sell himself to the company as a human resource supplier.

Kris said...

" its better to setup a sole prop and sell himself to the company as a human resource supplier."

What do you mean?? As an employee there is almost no way to escape paying tax :P

Heard of the middle income trap?

Michael Tsen said...

by setting up your own company to outsource to your current boss, you are filing business tax, if no profit is made at that year, you pay no tax.

MK - don't know much, want to learn more said...

"Tabungan bersih dalam skim SSPN" category for tax relief should be "up to RM6,000", not "RM3,000". Refer to:

Anonymous said...

How to do that?