BUDGET 2016 PROPOSALS – INDIVIDUALS

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CHANGES AFFECTING INDIVIDUALS

a) REVIEW OF INCOME TAX RATES FOR INDIVIDUALS
It is proposed that the taxable income bracket and tax rates be revised as follows:

Chargeable

Income (RM)

Existing Rates (%) Proposed Rates (%) Increase (%)

400,001 – 600,000

25 25 0
600,001 – 1,000,000 25 26

1

Exceeding 1,000,000 25 28

3

Income tax in other income brackets are maintained.

Non-resident individuals income tax is increased from 25% to 28%.

The proposal is effective from YA2016.

b) REVIEW OF SPOUSE RELIEF
Spouse relief will be increased from RM3,000 to RM4,000 for individual taxpayer whose spouse has no income and/or pays an alimony to his former wife.

The proposal is effective from YA2016.

c) TAX RELIEF FOR PARENTAL CARE
A new personal relief of RM1,500 for each parent is given to a resident taxpayer subject to the following conditions:
a. Such taxpayer does not claim expenses on medical treatment and care of parents;
b. Parents are residents and aged 60 years and above;
c. Parents have an annual income not exceeding RM24,000 per annum each; and
d. Parents are the legitimate natural parents and foster parents in accordance with the respective law subject to a maximum of 2 persons.

This relief can be shared with other siblings provided that the total relief claimed shall not exceed RM1,500 for each parent.

The proposal is effective from YA2016 till YA2020.

d) REVIEW OF CHILD RELIEF BELOW 18 YEARS OF AGE
Tax relief for each child below 18 years of age will be increased from RM1,000 to RM2,000.

The proposal is effective from YA2016.

e) REVIEW OF TAX RELIEF FOR CHILDREN STUDYING AT TERTIARY LEVEL
Tax relief will be increased from RM6,000 to RM8,000 for a child aged 18 years and above who pursues full time education at diploma level and above at a recognised institution of higher learning within Malaysia or at a degree level and above at a recognised institution of higher learning outside Malaysia.

The proposal is effective from YA2016.

f) REVIEW OF TAX RELIEF ON FEES FOR TERTIARY EDUCATION
Tax relief for resident taxpayer who pursues a course of study up to tertiary level in selected fields of study, or Master or Doctorate in level in any field at any institution or professional body in Malaysia recognised by the Government or approved by the Minister of Finance will be increased from RM5,000 to RM7,000.

The proposal is effective from YA2016.

g) GROSS INCOME FROM EMPLOYMENT
Gross income from an employment receivable in respect of any particular period shall be taxed in the year it is received. The requirement to relate the employment income to the particular period is removed.

The proposal is effective from YA2016.

h) INCOME RECEIVABLE BY AN EMPLOYEE WHO WILL BE LEAVING MALAYSIA
Income which is receivable by an employee who will be leaving Malaysia is deemed to have been received for the basis period before the employee leaves Malaysia. The option for taxpayer to tax the employment income in the basis period for the year of assessment it is received is removed.

The proposal is effective from YA2016.

i) TAX RELIEF ON EMPLOYEES’ CONTRIBUTION TO SOCIAL SECURITY PROTECTION SCHEME
To enable more employees to benefit from Social Security (SOCSO), the eligibility for mandatory contribution will be increased from a monthly salary of RM3,000 to RM4,000.

Employees will also be eligible to claim a tax relief up to a maximum of RM250 per year on the contribution to SOCSO.

The proposal is effective from YA2016.

j) EXTENSION OF EXEMPTION ON GRATUITY
New Paragraph 25D is introduced to extend the exemption on gratuity under Schedule 6 to include any sum received by way of gratuity on retirement from an employment under any written law or termination of a contract of employment, regardless of the individual’s age and period of service.

The sums of gratuity exempted shall not exceed an amount ascertained by multiplying the sum of RM1,000 by the number of completed years of service of the individual.

The proposal is effective from YA2016.

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