Income Tax is Your Friend or Foe?

Today, I will be discussing a topic that is relevant to individuals who earn income, specifically income tax in Malaysia. This article will focus on individuals who have only one source of income, specifically from a salary or similar fixed income received every month or week. If you have multiple sources of income, it can be quite complicated and would require consulting a tax expert or attending courses to understand the details better, especially for business owners, entrepreneurs, and those with various income streams like rental and partnerships. Therefore, I will share my knowledge based on over 20 years in the financial industry and how I personally optimize my taxes. Let us begin with the fundamentals.

Should we pay tax?

Firstly, let's address why we need to pay income tax. It's simple; if you are a citizen of Malaysia and living in the country, you are obligated to pay taxes. Different countries have different tax systems, and Malaysia is no exception. Paying taxes helps the government to fund projects, build infrastructure, provide facilities, and improve living conditions in the country. It's an essential contribution to the nation's development.

Next, let's discuss how to manage expenses and record them properly for tax purposes. Understanding what is taxable, what qualifies for income tax rebates, and other details is crucial. The income tax schedule comprises different categories, including personal tax relief and tax rebates. Personal tax relief covers a wide range of items, some of which require receipts as proof, while others do not. It's essential to keep your own records for those items that need proof.

Common mistakes

One common mistake people make is overlooking certain personal tax reliefs they are eligible for. For example, having a child makes you eligible for tax relief, but if you fail to indicate this on your tax form, you won't receive the benefit. Additionally, there are categories like personal development, where approved courses can grant you tax relief, and SPSS schemes related to children's education savings, which can reduce your tax burden.

Leveraging on Technology

To stay organized and manage your finances effectively, I recommend employing technology to your advantage. Use software, mobile applications, and scanners to store documents securely in the cloud. This way, you can easily track your expenses and claim the appropriate tax reliefs at the end of the year. Remember to review your financial goals and budget regularly to ensure you are on the right path.

I recently had the privilege of learning from the esteemed Adrian Ho, a renowned industry speaker on personal income tax. Attending Adrian Ho's class proved to be an eye-opening experience. It served as a gentle reminder that even when we feel knowledgeable, there is always room for growth and improvement. These learning moments, which I fondly refer to as "AHA moments," encourage self-reflection and motivate us to address our shortcomings.

In conclusion, proper financial planning and staying updated on tax reliefs are essential for managing your taxes effectively. I hope you found this information helpful for your financial journey. Thank you for reading!"