EXAMPLE

12
 EXAMPLE 12
The table below shows the tax exemption and tax relief items for Encik Hanafi

Individual RM 9000

Life insurance and EPF (limited to RM 7000) RM 6000

Donation to library RM 500

It is given that Encik Hanafi's annual income in 2020 was RM 70000 and his zakat payment was RM500
(a) Calculate Encik Hanafi's chargeable income
(b) Calculate the income tax payable by Encik Hanafi
(c) Discuss the difference between tax relief and tax rebate
Annual income = RM 70000 (includes all forms of wages, salaries, bonuses and so on)
Individual relief = RM 9000 refer to items or expenses,
Life insurance and EPF relief = RM 6000 which are not taxed
Donation exemption = RM 500 (refers to all personal expenses)
Zakat payment = RM 500 (tax rebate is given to reduce tax to be paid)
(a) Chargeable income = total annual income - tax exemption - tax relief
= RM 70000 - RM 500 - (RM 9000 + RM 6000)
= RM 54500
(b) By referring to tax rate table:
Tax on the first RM 50000 = RM 1800
Tax on the next balance = (RM 54500 - RM 50000) × 14%
= RM 4500 × 14%
= RM 630
Income tax payable = base tax + tax on the next balance - tax rebate
= RM 1800 + RM 630 - RM 500
= RM 1930
(c) Tax relief is deducted from annual income, while tax rebate is deducted from income tax imposed
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