BDCM-B-Week25-Tax: INCOME TAX ACT 1967 (AS AT 1ST JANUARY 2019) PART 2 EPISODE 2

1.      Manner in which chargeable income is to be ascertained

a.      Below are the step by step how does one to be tax upon the chargeable income:-

                                                    i.     Basis years and basis periods

                                                   ii.     Gross income

                                                  iii.     Adjusted income and adjusted loss

                                                  iv.     Statutory income

                                                   v.     Aggregate income and total income

                                                  vi.     Chargeable income

b.      Deduction of tax:-

                                                    i.     From interest paid to a resident

                                                   ii.     On the distribution of income of a family fund, etc.

                                                  iii.     From income derived from withdrawal of a deferred annuity or a private retirement scheme

c.      Income minus loss

                                                    i.     Do not own the earning source

                                                   ii.     Do not have earn anything from the source

2.      Rates of tax

a.       

                                                    i.     Everyone has tax rate as specific in Part 1 of Schedule 1

                                                   ii.     Subject to section 109: Deduction of tax, the income tax for the below can be refer on the Part 2 of Schedule 1

1.      Where the person is not a resident in Malaysia and earns interest or royalty that derived from Malaysia

2.      Where the person is not a resident in Malaysia but earns thru the service performed or rendered in Malaysia by a public entertainer

                                                  iii.     For the co-operative society, the tax rate should be on Part 4 of Schedule 1

                                                  iv.     Those fall under 4A: special classes of income, the tax rate should be on Part 5 of Schedule 1

                                                   v.     If earning from interest as long it is from Malaysia, tax rates may refer to Part 6 of Schedule 1

                                                  vi.     Income of the foreign fund management company, may refer to Part 9 of Schedule 1

                                                vii.     Income from the unit trust, may refer to Part 10 of Schedule 1

                                               viii.     If the income from the family fund, may refer to Part 11 or Schedule 1

                                                  ix.     Non-resident, may refer to Part 13 of Schedule 1

                                                   x.     For the withdrawal from a deferred annuity or private retirement scheme, may refer to Part 16 of Schedule 1

b.      Under certain circumstances, the minister may change the rates of the tax, and the modified rates can take effect on the beginning of the first year that the minister intended to start.

c.      If the minister intended to change the tax rates, S/he must bring this up to the Dewan Rakyat

d.      If the new tax rates has a certain contradict such like:-

                                                    i.     If the amount of tax is supposed to be pay due to the old rates, but under the new rates s/he doesn’t need to pay. On this context, s/he is still required to pay for the final sum based on the old rates.

1.      Example: XYZ tax amount of RM1k on 2017 and has not yet pay even in 2018. 2018 year XYZ tax is abolished. Despite the year of abolishment of the tax, XYZ of tax 2017 is still required to be pay.

                                                   ii.     Depending the new tax rates implementation, sometimes it may cause a person to paid additional amount, s/he may claim it back from the Director General

1.      Example: tax rate of 2017 for monthly is 3%, and effectively December 2017 the tax is 2.5%. There is probably due to the system or not aware of the new ruling, s/he may have paid 3% instead of 2.5%.

e.      Tax rates can be referring under the schedule 1.