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Chapter II


Income Tax

An income tax is a government levy (tax) imposed on individuals or entities

(taxpayers) that varies with the income or profits (taxable income) of the taxpayer. Details
vary widely by jurisdiction. Many jurisdictions refer to income tax on business entities as
companies tax or corporate tax. Partnerships generally are not taxed; rather, the partners are
taxed on their share of partnership items. Tax may be imposed by both a country and
subdivisions. Most jurisdictions exempt locally organized charitable organizations from tax.
An income tax is a government tax on the taxable profit earned by an individual or
corporation. The resulting revenue is usually one of the chief sources of cash for a
government entity. It is considered one of the more fair forms of taxation, since it is only
imposed if a person or business has been successful enough to generate taxable income. Thus,
its impact on the poor or unprofitable is minor to non-existent. Most tax rates are progressive,
which means that the tax rate increases as the level of income increases. The reasoning
behind this tax structure is that the poor are less able to pay taxes, while the rich have more
excess cash with which to pay taxes. The amount of income tax paid can be reduced by a
number of deductions, which are allowed as the result of legislation by the relevant
government entity. These deductions are usually intended to foster certain types of behaviour
by taxpayers Income tax generally is
computed as the product of a tax rate times taxable income. The tax rate may increase as
taxable income increases (referred to as graduated rates). Tax rates may vary by type or
characteristics of the taxpayer. Capital gains may be taxed at different rates than other
income. Credits of various sorts may be allowed that reduce tax. Some jurisdictions impose
the higher of an income tax or a tax on an alternative base or measure of income.
Taxable income of taxpayers resident in the jurisdiction is generally total income less
income producing expenses and other deductions. Generally, only net gain from sale of
property, including goods held for sale, is included in income. Income of a corporation's
shareholders usually includes distributions of profits from the corporation. Deductions
typically include all income producing or business expenses including an allowance for
recovery of costs of business assets. Many jurisdictions allow notional deductions for
individuals, and may allow deduction of some personal expenses. Most jurisdictions either do
not tax income earned outside the jurisdiction or allow a credit for taxes paid to other
jurisdictions on such income. Non residents are taxed only on certain types of income from
sources within the jurisdictions, with few exceptions. Most jurisdictions require selfassessment of the tax and require payers of some types of income to withhold tax from those
payments. Advance payments of tax by taxpayers may be required. Taxpayers not timely
paying tax owed are generally subject to significant penalties, which may include jail for







Income Tax in Malaysia

Malaysias taxes are assessed on a current year basis and are under the self-

assessment system for all taxpayers. Malaysia's taxation system is territorial in scope. All
income accrued in, derived from or remitted to Malaysia is liable to tax. However, income of
any person (other than a resident company carrying on the business of banking, insurance or
sea or air transport) derived from sources outside Malaysia and received in Malaysia is
exempted from tax.
Table 2.1
Types of taxes in Malaysia
Direct taxes
Income tax
Real property gains tax
Petroleum income tax

Indirect taxes
Excise duty
Import and export duty
Stamp duty
Goods and services tax

Table 2.2
Malaysia tax rate.
Income tax rate
Corporate tax rate
Sales tax / service rate

26 %
25 %
5 % 10 %

The income tax, with the highest rate only recently being at 28%, has been cut down
now to 26% for residents and 27% for non-residents. In addition, taxes like estate duties,
annual wealth taxes, accumulated earnings tax or federal taxes are not levied in Malaysia. All
persons staying in Malaysia for more than 182 days are considered as residents under
Malaysian tax law, regardless of nationality. All persons staying less than 182 are regarded
non-residents and are taxed on a different scale. Apart from that there is a third group of
persons who are exempt from taxation. This applies to those who are employed in Malaysia
for less then 60 days in a year, who are aged over 55 years and receive Malaysian pension or
persons who are receiving interest from banks. Expatriates who are in Malaysia under the

Malaysia My Second Home Programme are not required to pay tax on their pension or
income remitted from abroad. Apart from this, all income achieved in or derived to Malaysia
is reliable to tax. Malaysia has an Agreement for the Avoidance of Double Taxation for
several countries. For further details go the the website of the Malaysian Inland Revenue

Calculation of income tax and tax deduction

The income tax of non-residents is calculated on a three-step tax rate, 27%, 15% and
10%, depending on the type of income. The income tax rate for residents is calculated on the
amount of income and is much more precise. The income is classified into 8 different tax
groups ranging from 0% to 26%. Tax deductions in Malaysia are available in numerous cases,
including medical expenses, purchase of books, computers and sport equipment or education
fees. The Inland Revenue Board of Malaysia, which is the country's responsible institute for
taxation, provides very clearly represented and detailed information on all tax issues. There
you will find a list on tax deduction cases, the income tax scale for residents and for nonresidents.

Income tax declaration

All tax residents who are subject to taxation must file a Malaysian tax return. The
submission deadline is the 30th of April for the preceding tax year. This deadline cannot be
extended. A tax year equals a calendar year. You will receive an Income Tax Return Form
from the Inland Revenue Board of Malaysia. Residents, according to Malaysian tax law, have
to fill in a BE Form, non-residents an M Form. You have to fill the respective forms
completely and to return them within 30 days to an IRBM (Inland Revenue Board of
Malaysia) office. After your declaration has been processed, your credit in the account will be
refunded to you automatically.

Other taxes

Instead of V.A.T. there are two other types of consumption taxes, namely service tax
and sales tax. It is planned to introduce a combined Goods and Services Tax (GST) but this
step has been currently put on hold. The sales tax has 3 rates, 5%, 10% and 15%, with 5%
applying to non-essential foodstuffs and buliding materials and 15% to cigarettes and alcohol.
Basic foodstuffs, basic buliding materials, books and certain tourist and sports goods are
Service tax is imposed in Malaysia on certain services and goods, like food and drinks, which
is provided in establishments like restaurants and hotels. It is currently fixed at 5%.

Malaysia Tax System



ezHASil e-Filing is a most convenient way to submit Income Tax Return Form (ITRF). It
also saves a lot of time and very easy to complete it online rather than conventional methods
by manually filling up the form because all the calculation is automatic. Taxpayers are
encouraged to complete their Income Tax Return From (ITRF) via e-Filing. It is very
convenience, save time and easy to complete it online rather than conventional methods by
manually filling up the form. For a new taxpayer or existing taxpayer who would like to
complete ITRF for the first time, there are a few steps you have to complete prior to filling
the ITRF form online through e-Filing. People just need to enter their income, deduction,
relief and rebate only. The most important thing is they will get a faster refund in case they
paid excess income tax through Potongan Cukai Bulanan (PCB). Also, LHDN extended the
dateline for extra 2 weeks. Fig. 2.2 shows overview of e-filing in Malaysia. The e-filing
developed following from the need to improve efficiency both for the legal community and
also the judiciary. The benefits of e-filing are as follows :

Concurrent access to case documents (24 hours, 7 days a week).

Interactive alerts, notifications and e-mails.

Cost-effective storage of files in digital format.

Options of submitting from anywhere (no more queues).

Achieve greater automation and end-to-end computerisation of court processes.

Improve efficiency in management and administration of court related matters.

Eliminate incidences of missing files.

Allows counsel to file court document from anywhere without queuing.

e-filig systems increase the quality and quantity of information available to tax
officers, enabling them to complete transactions faster and more accurately.

Figure 2.1 Overview of e-filing in Malaysia


Mobile devices
Mobile devices have come a long way over the past few years. Mobile devices are

being used extensively and serve many purpose. The iPhone was first released to consumers
in June 2007. Ever since the first release, the devices has increasingly gained in popularity,
partly due to its advanced functionality and usability.
%20apple&f=false. The advent of the smart phone as a highly complex technology has been
accompanied by mobile operating systems (OS), large communities of developers, diverse
content providers, and increasingly complex networks, jointly forming digital infrastructures.
The multi-faceted and relational character of such digital infrastructures raises issues around








Android pushed past the one billion unit mark in 2014, a significant milestone by
itself but also because total Android volumes in 2014 bested total smartphone volumes in
2013. Samsung retained the leadership position by a wide margin, shipping more volume
than the next five vendors combined. At the same time, Samsung's total volumes for the year
remained essentially flat while Asian vendors including Huawei, Lenovo (including
Motorola), LG Electronics, Xiaomi, and ZTE fueled the most growth for Google's platform.
iOS saw its market share for 2014 decline slightly even as volumes reached a new record and
grew at nearly the same pace as the overall smartphone market. Much of this was due to the
strong demand for Apple's new and larger iPhones and the reception they had within key
markets. What remains to be seen is how Apple will sustain demand going forward, as larger
screens were among the last gaps in its product portfolio. Windows Phone had the smallest
year-over-year increase among the leading operating systems growing just 4.2%, well below

the overall market. Having finalized its acquisition of Nokia in the spring of 2014, Microsoft
relied primarily on a long list of entry-level Lumia devices to maintain its position in the
market, and relied on its partners HTC and Samsung to provide cover on the high-end of the
market. With the launch of Windows 10 later this year, Windows Phone stands to make a
more concerted effort to return to the high end of the market. BlackBerry posted the only
year-over-year decline among the leading operating systems, falling -69.8% from 2013
levels. 2014 marked a year of rationalization for the beleaguered platform, and by the end of
the year the company had revealed multiple enhancements to its platform and new device
additions with the BlackBerry Passport and BlackBerry Classic. CEO John Chen anticipates
10 million units will be shipped in 2015, returning the company to profitability and marking a
72% increase over the 5.8 million units shipped in 2014.
Apple's iOS mobile operating systems (originally iPhone OS) is a mobile operating
system created and developed by Apple Inc. and distributed exclusively for Apple hardware.
iOS is Apples proprietary operating system that runs on the iPhone, iPod Touch, and iPad. It
is the second most popular mobile operating system in the world by sales, after Android. iPad
tablets are also the second most popular, by sales, against Android since 2013, when Android
tablet sales increased by 127%. Built for multi touch interaction, all user input in iOS is
through touch gesturing, a technology that Apple has pioneered. The operating system is
based on the Macintosh OS X
Apple iOS operating system including iPhone OS 1, iPhone OS 2, iPhone OS 3, iOS 4, iOS
5, iOS 6, iOS 7, iOS 8 and iOS 9. Mac OS X acts as the parent software for iOS, as it shares
the Darwin operating system foundation, making it characteristically a UNIX operating
system. There are four abstraction layers, ways of hiding the implementation details of a
particular set of functionality, within iOS: the Core OS layer, Core Services layer, the Media
layer, and the Cocoa Touch layer. The overall trend of the operating system has given greater
control to developers. There was no SDK (software development kit) for building native apps
until iPhone OS 2.0, and at that point it was rather limited. iPhone OS 3.0 saw tremendous
improvements, giving developers new abilities such as Core Location and Push Notifications.

Finally, iOS 4.0 saw the introduction of multitasking, though in practice it asks more like app

%20filename%3DIPhone_Software_Sales_Take_Off_Apples_Jo.pdf . The term "iOS" was
originally know as "iPhone OS" and was introduced in 2007 along with the first iPhone
hardware device Apple released. It was the term used to describe the software that would
operate the iPhone and is derived from the term "OS X", which is how Apple describes its
"operating system" for its Macintosh computers. The "X" stands for 10 which is the newest
version of the computer software Apple created to operate the desktop and laptop computers
they design. The "iOS" platform is a mobile-device-based software system that works like a
computer system, but on mobile devices like portable phones. It is designed to be smaller,
faster and use less power. It also has a "touch" friendly user interface so it works better when
a finger is used to interface with the system instead of a mouse or stylus that has been used in
the past to interact with operating systems. The iPhone has run on iOS since its release in


The App Store, one of Apples native applications found within iOS, is one of the
largest mobile marketplaces in the world. As of January 2011, there are 400,000 apps in the
App Store, and users have downloaded over 10 billion of these programs. While these
numbers sound great, it makes it exponentially more difficult for your app to be noticed.
However, if it does get noticed, the chances of it paying off are greater. Developers receive a
70 percent cut of whatever they choose to charge customers for their apps, with the other 30



to Apple


Fig. 2.2 iPhone models

Table 2.3
Top four smartphone operating system, unit shipments, market share and year over year growth in 2014 (units in millions)
Operating System

2014 Unit Volumes

2014 Market Share

2013 Unit Volumes

2013 Market Share

Year Over Year Change


1 059.3

81.5 %


78.7 %

32.0 %



14.8 %


15.1 %

25.6 %

Windows Phone


2.7 %


3.3 %

4.2 %



0.4 %


1.9 %

- 69.8 %



0.6 %


0.2 %

234.8 %


1 300.4

100.0 %

1 018.7

100.0 %

27.7 %


Income Tax Calculator

Under the present income tax regulations many millions of persons will file income
tax returns, and the number will probably be increased in subsequent years. The number of
man-hours expended in preparing and. checking these returns, if calculated, would be,
indeed, astounding. At present, there has been made available three types of returns that an
individual may file. These various forms are provided in an effort to reduce the amount of
time consumed in preparing and checking income tax returns, and also to make available to
certain classes of people a simplified form on which they may file their income tax returns.
The number of income tax returns handled by such tax experts will ordinarily be
appreciable and any saving in the amount of time consumed in preparing a return will be
beneficial. A great deal of time is also consumed in checking the mathematical computations
present in these returns after they are filed and any simplification of this checking process is
most beneficial. Accordingly, the principal object of my invention is to provide a tax
calculator that quickly, easily, and accurately calculates the amount of income tax from the
net taxable income. Another object is to provide a calculator wherein from a single setting
both the tentative tax 3 and combined normal tax and surtax may be obtained. Another object
is to provide a tax calculator that is of a convenient size and which will calculate income
taxes over a wide range of net taxable income values. A further object is to provide a tax
calculator which prevents mistakes brought about by the association of inappropriate scales.
A still further object is to provide a tax calculator that is dependable and accurate to within
one cent.
References Cited in the file of this patent UNITED STATES PATENTS Number Name Date
Re. 10,592 Child May 5, 1885 563,778 Loyd July 14. 1896 865,808 Stump Sept. 10, 1907
998,603 Diefenback July 25, 1911 1,145,020 Hill July 6., 1915 2,187,496 Hess Jan. 16, 1940
2,424,890 Howells July .29, 1947 2,427,976 Posson Sept. 23, 1947 2,553,338 Shaw 1 May
15, 1951


Income Tax Mobile Apps

A mobile app is a computer program designed to run on mobile devices such as

smartphones and tablet computers. Most such devices are sold with several apps bundled as
pre-installed software, such as a web browser, email client, calendar, mapping program, and
an app for buying music or other media or more apps. In 2013, the global mobile app market
was estimated at over US$50 billion and is expected to grow to $150 billion in the next two

years. According to Ghose Anindya & Han Sang Pil, they build a structural econometric
model to quantify the vibrant platform competition between mobile (smartphone and tablet)
apps on the Apple iOS and Google Android platforms and estimate consumer preferences
toward different mobile app characteristics. They found that the app demand increases with
the in-app purchase option wherein a user can complete transactions within the app. On the
contrary, app demand decreases with the in-app advertisement option where consumers are
shown ads while they are engaging with the app. The direct effects on app revenue from the
inclusion of an in-app purchase option and an in-app advertisement option are equivalent to
offering a 28% price discount and increasing the price by 8%, respectively. They also find
that a price discount strategy results in a greater increase of app demand in Google Play
compared with Apple App Store, and app developers can maximize their revenue by
providing a 50% discount on their paid apps. Using the estimated demand function, they find
that mobile apps have enhanced consumer surplus by approximately $33.6 billion annually in
the United States.
In India, Income Tax Department of India has announced that a mobile app would be
soon launched, for filing returns. They are developing a mobile app which can be used by
users for filing their income tax returns. This is a masterstroke from the IT Department, as the
penetration of smartphones is catching up fast, and filing of income tax can now be ultra fast
and easy to do. As per officials, online tax returns is a major hit among Indians, and it is
expected that a mobile app will further attract non-tax payers into paying their taxes. Income
Tax Department Is Behind Their Target For the fiscal year 2014-15, IT Department collected
14% less tax, compared to their expectations. Till March 31, 2015, revenues under direct tax
category stood at Rs 6,96,000 crore, whereas the target was Rs 7,05,000 crore. This shortfall
of Rs 9000 crore in tax collections can be compensated for the fact that net tax collections
was 19% more than last fiscal year. During that time, IT Dept. blamed the slow moving
manufacturing and construction industry for the shortfall in their targets. For this fiscal year:
2015-16, IT dept. has set a collection target of Rs 7,98,000 crore; and it seems that the
developments are satisfactory as of now. On the contrary, Reddit IT Tax collection, there are

several tax-payers who dont declare everything they have spent; hence the whole concept of
filing tax returns is itself flawed. Taking hardcopies of tax returns, and then snail-mailing
them was another grudge shared by social media users. In India, only 2.89% of the population
pays income tax, which is far, far lower than other developed countries. For instance, in US,
45% of all citizens pay their taxes. Although the present Govt. has introduced several large
scale changes in the process of filing taxes, there are still huge gaps between what is expected
and what people are actually doing. Along with mobile app, Income Tax Dept. also needs to
introduce sweeping changes in the whole process to generate more revenues from income
In Singapore, the Inland Revenue Authority of Singapore (Iras) announced several
measures to make filing individual income tax returns more convenient this year. Taxpayers
can file their taxes via smartphone from March this year (2016). With this, filing can be done
easily from anywhere, anytime and taxpayers can avoid a last minute rush, said Iras. They
can also check on-the-spot if they are eligible for certain personal reliefs such as the
Qualifying Child Relief and Grandparent Caregiver Relief. Taxpayers who wish to claim
rental expenses for their tenanted residential properties will enjoy simplified tax filing. Prefilled on their online tax forms will be the amount of deemed rental expenses calculated
based on 15 per cent of the gross rent. Iras also said that more than 210 organisations this
year would have have submitted their commission earners' income records under the eSubmission of Commission Income Scheme. This means that more than 70,000 commissionearners - real estate agents and insurance agents included - will have an easier time filing
their taxes as they would just need to verify or edit the pre-filled income information and
claim their expenses. Some 1.4 million taxpayers who are not required to file can preview
their tax bill and request an early assessment from this month. This is provided they have no
changes to their pre-filled income and relief claims. In 2015, 14,000 taxpayers requested
early assessment. The deadline for filing your taxes is April 15 for paper returns, or April 18
if you are doing it online. They can also check on-the-spot if they are eligible for certain
personal reliefs such as the Qualifying Child Relief and Grandparent Caregiver Relief.

In 2011, the IRS launched IRS2Go, its official mobile app designed to provide

taxpayers with a convenient self-service income tax return tool. Over the years, its been
updated for a streamlined user experience that provides more information and utility than
previous versions.
Table 2.4
Information IRS2Go Mobile App
Cost to download
Where available

Amazon rating
iTunes App Store rating
Google Play rating

IRS2Go Mobile App

Amazon, iTunes App Store and Google Play
-Info not available for Amazon
-Info not available for iTunes App Store
-10 000 to 50 000 in Google Play
4 out of 5 stars
3.5 out of 5 stars
4.1 out of 5 stars

Figure 2.3 The mobile IRS2Go apps


The MyBlock mobile app designed to provide check refund status and browse a

notable help section thats full of terms and answers to basic tax questions. The app also
features a checklist that helps create a tax filing to-do list, along with tools that allows plan
paycheck in advance and estimate the extent of refund. Furthermore, it can check the status of
Federal refund and even access prior years tax returns to compare if need be. The app also
has a handy checklist feature that makes sure that people dont miss any crucial step along the
way, and theres even a glossary of hundreds of tax terms that they can access quickly and

Figure 2.4 The mobile My Block apps


Expensify is a mobile application that aims to make expense reporting easy. With the

app, users can snap pictures of receipts, track spending, and create and submit expense
reports all from their iPhones, iPads or Android devices. Expensify is a mobile apps that
help independent contractors or anyone else looking to further cement their deductible
expenditures throughout the year. The straight forward mobile app allows to capture receipts,
track time or mileage, and generally make note of any expenses or attachments that have
laying around. Using Expensify, user can add receipts, track time or mileage, and create

expense reports quickly and easily. The app even has a nifty camera function that can use to
take photos of receipts so that user can store them right in the app. It can also automatically
import credit card transactions and scan receipts to create expense reports if desired
both of which can later convert into IRS-approved eReceipts that minimize user paper
footprint, and, more importantly, any tax-related discrepancies.

Figure 2.5 The mobile Expensify apps

2.6.4 My Tax India
My Tax India is mobile app that instantly calculates user tax, tax splits, and can
suggest how much more investment is needed to save a given amount from user income. User
can also monitor and track user savings through graphs.

Figure 2.6 The mobile My Tax India apps


The HMRC Tax calculator app allows user to work out how much tax they pay and

how the government spends it. The app was introduced in Spring 2012 and is periodically
updated with new features. The HMRC Tax Calculator can be downloaded for free from
Apples App store or from Google Play. It is also available online (as a browser version). This
mobile apps can help small businesses with record keeping on the go, the commercial

software industry, following consultation with HM Revenue & Customs (HMRC), are
producing simple record keeping mobile applications for businesses below the VAT threshold.
In 2015, HMRC have launched a new mobile application available now on Apple and
Android devices, which may be of interest to Service leavers who are considering business
start-up or becoming self-employed. The new app for businesses provides easier access to a
wide range of HMRC's digital help and support. The app links to services which provide the
right advice in helping businesses with their tax obligations. The new free app, part of our
continuing commitment to make tax easier, quicker and simpler for business, allows access to
the following via your tablet or mobile device:

Business live webinars and recorded videos

Business e-learning
Signing up to our email alerts
HMRC Business Help Twitter account
Commercially developed Record Keeping apps

Figure 2.7 The mobile HMRC apps