KUALA LUMPUR: Tax season may be one of the most stressful times for taxpayers, especially when there are changes to the tax system, but planning ahead and equipping oneself with knowledge is key to avoiding mistakes when the time comes to file income tax.
“My biggest tip for planning ahead is to go through the reliefs and see what changes are there from year to year. You cannot just assume things remain static year on year. For example, for Year of Assessment 2019, for the first time ever, they have reduced the effective relief for EPF (Employees Provident Fund) alone. But the combined EPF and life insurance relief has increased actually, to RM7,000,“ said RinggitPlus CEO Liew Ooi Hann (pix).
“This sounds very little but it affects a very large segment of the population, specifically the segment of the population who previously had been enjoying the full EPF tax relief but have no life insurance. If you earn above RM3,000 a month and you don’t have life insurance, you are actually slightly worse off this year than last year. But for people who do have life insurance, when combined with EPF they can maximise, the deductions are actually more,“ he told SunBiz in an interview.
Taxpayers should also look at ways to improve the way they are doing things for example, using the National Education Savings Scheme (SSPN) instead of a savings account or fixed deposit to save up for children’s education.
“Consider doing it in SSPN because in addition to getting a reasonable rate, you also get tax relief. If you’re investing in mutual fund, unit trust, you can do the same thing with the same provider but in a PRS scheme. So, switch to PRS. If you are already with an asset manager, most asset managers have a PRS version of the same investment,“ he said.
According to Liew, soft copies of receipts are acceptable thus he recommends taking photos of receipts so that a digital record is available if the receipts are misplaced.
Lee Hishammuddin Allen & Gledhill (LHAG) partner S. Saravana Kumar said the most important aspect of tax planning and preparation for YA2019 is knowledge, and staying up to date on tax matters is necessary to ensure tax compliance and avoid missing out on any available tax reliefs and rebates.
“One of the tax reliefs is an allowance of up to RM2,500 for lifestyle expenses, which includes purchasing reading materials, gadgets, gym memberships and internet subscription. Further, individuals may also claim for, among others,
insurance schemes, medical expenses and own education fee,“ he said.
Another aspect of good tax preparation and planning is good bookkeeping. Saravana advises taxpayers to keep records of relevant documents such as accounts, receipts and invoices as these are required as proof of tax reliefs claimed. Such documents should be kept for at least seven years.
Source: The Sun Daily