Computation of Chargeable Income

for Individuals and Companies

 Structure for computing chargeable
income
• Tax in Malaysia is based on a person’s Chargeable Income.
• Section 5,ITA-emphasises the computation of chargeable Income:-
• 1-Ascertaines the source of income received in the basis period of
the particular YA.
• 2-Compute the Gross Income
• 3-Compute the Adjusted Income
• 4-Compute Statutory Income
• 5-Compute Aggregate Income
• 6-Arrive the Chargeable Income
 Cont….
• Gross income-outlines by Section 4 which constitutes Gross Income from
business, employment, dividends, interest, rent, royalties, pension and etc.
• Adjusted Income-Gross Income from each source reduced by expenditure-
wholly and exclusively incurred to produce the gross income,-Section 33 &
39
• Statutory Income-Adjusted Income minus with Capital Allowances.
• Aggregate Income-Statutory Income from business which is reduced by the
amount of business loss carry forward.
• Total Income-the total amount of aggregate income
 GASAT-
Gross,Adjusted,Statutory,Aggregarate &
• Adjusted Income Total Chargeable

RM
Net Profit before Tax XX
[+]Non-Deductible/Non Allowable Expenses -x
Adjusted Income ZZ
 Cont…Illustration
• Abc Sd Bhd provides with following computation for the year 31/12/2017

RM
Gross profit before taxation 100,000
Less : Expenses
-Revenue –tax deductible -40,000
-Capital-non-deductible -18,000
Net profit 42,000
 Cont…the above computation will be
adjusted :
RM
Net profit 42,000
[+]Non deductible expenses 18,000
Adjusted income 58,000

If there is a loss in business it will be allow for deduction later before arriving
the total income.
• Statutory Income
• Business Community Cont…

• Based on Sch 3-capital allowance will be given for any capital expenditure incurred by business-e,g
purchase machinery
• The capital will be separately calculated against adjusted income
RM
Adjusted Income ZZ
-Capital Allowance -cc
Statutory Income SS
 Cont…
• Aggregate Income- Addition of all statutory income
RM
Statutory Income
-Business 1 BB1
-Business 2 BB2
-Partnership Business PP1
Aggregate of statutory business income AI
[-]Business loss b/f [BL]
Net Aggregate Statutory Business Income Net AI
 Cont…Illustration
RM
Statutory Income 40,000
Business loss b/f -50,000
Dividend Income 30,000

The aggregate income will be assessed:

RM RM
Statutory Income 40,000
[-]Business loss b/f-Sect 43[2] -50,000
Amount utilized -40,000
[amount loss to be c/f=10,000]
Net statutory income 0
 Cont…
• Total Income-Amount of the Aggregate Income for the year of assessment which
reduced by deductions allowed under Sect.44 in the following order:
• -Adjusted loss from business sources for the basis period
• -Prospecting expenses-Sect 4
• -Certain pre-operating-Sect 4B
• -Approved donations-Sect 44[6]
• -Group Relief-Sect 44A-losses can be allowed if the principal share ownership remains
unchanged or at least 50% unchanged
 Illustration –Group Relief for company
RM
Business 1
Adjusted loss -30,000
Sch 3-Capital allowances 8,000
Rental 40,000
Approved Donation 5,000
The Total Income will be assessed as follows:
Statutory Business Income Nil
Sch 3-Capital Allowance(8,000 will be c/f) -
Rental 40,000
Aggregate Income 40,000
[-]Business loss-current –Sect 44(2) -30,000
[-]Approved Donation-Sect 44(6) -5,000
TOTAL INCOME 5,000
 Summary of Computation for
Chargeable Income

Gross Income
[+]Not Allowable Expenses/Non-deductible Expenses
[-]Double Deduction
Adjusted Income
[+]Balancing Charge
[-]Capital Allowance
[-]Balancing Charge
Statutory Income
[+] statutory Income from other business
[-]Business loss b/f
[+]Non-business Income
Aggregate Income
[-]Current Business loss
[-]Approved Donation
Total Income
 The tax Treatment for Business Loss-
b/f and current & Donation
• Business loss
• Donation –Section 44[6]-Approved Donation
-Gift of Money/Donation to Government, State Government, Local Authority or
Approved Institution-For Company-cash contribution up 10% of its Aggregate Income
-Gift of Artifact, manuscript or painting to Government-the value is determined by the
Dept. of Museum and Antiques /the National Achieves.-Sec 44[6A]
 Cont…
• -Gift of money to library facilities-public,school higher institutions, Max –
RM20K-Sect 44[8]
• -Gift of money or benefits in kind-for public facilities for disabled person.-
sect 44[9]
• -Gift of money or medical equipment to healthcare facilities-Max RM20K-
certified by MOH-Sect 44[10]
• -Gift of painting to the National Art Gallery-Sect 44[11].
 Tax Treatment for Personal Relief and
Tax Rebate
Only provided for Individual Tax Resident
Personal tax relief is always amended according to Budget.
Personal relief is a deduction against of total income.
Tax rebate is given as a direct set off against tax payable.
The common tax rebate provided into 3 main areas-self, spouse and Zakat
 Tax Rates Applicable for Individual
Taxpayer and Company
• Individual Taxpayer
http://www.hasil.gov.my/bt_goindex.php?bt_kump=5&bt_skum=1&bt_posi=2&bt_uni
t=5000&bt_sequ=11&bt_lgv=2
• Company
http://www.hasil.gov.my/bt_goindex.php?bt_kump=5&bt_skum=2&bt_posi=5&bt_uni
t=1&bt_sequ=1