Income Tax and Insurance Tax Reliefs: What You Need To Know

Tax season is here and before you know it, many of you will be scratching your heads trying to figure out how to file your taxes and what kind of tax relief you’re entitled for. In fact, paying your income tax can be a milestone in any citizen’s life. However, the process can seem too daunting and tedious for many, as some of the terms tend to go right over your head. Here’s a handy guide of what you need to know and what you need to do.

Since governments can’t operate without revenue, income taxes are a great source of revenue for governments. The money you pay in taxes goes to many places. In addition to paying the salaries of government workers, your tax Ringgits helps to support civil servants, such as teachers, police, doctors and firefighters.

Tax money helps to ensure the roads you travel on are safe and well maintained. Taxes fund public libraries and parks. Taxes are also used to fund many types of government programs that help the poor and less fortunate, as well as the building of schools and hospitals.

What happens if you don’t pay for income tax?

Because paying your taxes is a civic duty, tax evaders may face jail time for illegally dodging their responsibility. According to the Income Tax Act of 1967, “Failure (without reasonable excuse) to furnish an Income Tax Return Form” can result in fines of RM200 to RM2, 000, imprisonment or both.

On the other hand, “Willfully and with intent to evade or assist any other person to evade tax” carries a much more severe penalty with fines of RM1, 000 to RM20, 000, imprisonment or both, plus 300% of the amount undercharged.

Tax evasion in this context refers to non-payments and underpayment of taxes owed. In addition, an “attempt to leave the country without payment of tax” will also result in fines of RM200 to RM2, 000, imprisonment or both.

How do I pay my income tax?

For most of us, the mandatory monthly tax deductions set by our employers would have already covered our income tax payments for the year, and filing our taxes means getting an income tax refund from the government.

But, for those who have a secondary income or run their own businesses, that isn’t always the case. If you have filed your income tax and there is a deficit to be paid, the Inland Revenue Board of Malaysia (IRB) offers a wide range of methods to pay for your taxes – ensuring there are no excuses for not paying your income tax on time.