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Monday, March 31, 2014

Malaysia Income Tax Guide - Tax Reliefs

So, it's the time of the year again - the income tax season. For those who has already getting their salary deduction monthly through the PCB or Scheduler Tax Deduction (STD), this is the time where you can claim back what you have paid in advance to the government.

The purpose I am writing this blog post is to remind as many as possible to do the income tax filing as soon as possible; reason being, you will get your income tax refund faster and you will get the peace of mind of having something done before the deadline. There is still another 30 days to go before the deadline, so some might still been struggling to find or get receipts to prove their tax reliefs claim, but in my opinion, for those who are having taxable income in the middle of one tax bracket, those reliefs won't really affect much - unless the deduction brings you to a lower tax bracket.

What is tax reliefs? It is defined as “an amount that can be deducted from a person’s annual income to reduce the amount on which tax is paid”. To describe it in a more clear and concise manner, it is actually a way for you to lessen your chargeable income.


For example, you take home a annual paycheck of RM40,000 from your company in 2013 and if there were no tax exemptions or reliefs, your chargeable income will remain the same and your tax for the year would have been in the 11% bracket; but because every residents get up to RM9,000 tax relief your chargeable income will now be RM31,000 and tax at 6% bracket.


The following are the reliefs available for Malaysians:-
* Removed:- RM500 for broadband


Tax reliefs
Max amount (RM)
Self and Dependent
9,000
Life insurance and EPF
6,000
Husband/Wife/Alimony Payments
3,000
Ordinary Child relief (per child)
1,000
Interest expended in 2013 to finance purchase of residential property dated 2010 (but interest payments starting in 2011 only)
10,000
Net saving in SSPN's scheme
6,000
Education Fees (Individual)
5,000
Updated: PRS Voluntary Contribution
3,000
Purchase of personal computer (every 3 years)
3,000
Insurance premium for education or medical benefit
3,000
Special relief for tax payers earning an income of up to RM8,000 a month (RM96,000 annually). Only applicable for the 2013 year of assessment.
2,000
Purchase of books, journals, magazines and publications
1,000
Complete medical examination
500
Purchase of sport equipment for sport activities
300
Disabled Individual
6,000
Basic supporting equipment (for disabled self, spouse, child or parent)
5,000
Medical expenses for serious diseases
5,000
Disabled child 
5,000
Medical expenses for parents
5,000
Child age 18 years old and above, not married and pursuing diplomas or above qualification in Malaysia @ bachelor degree or above outside Malaysia in program and in Higher Education Institute that is accredited by related Government authorities
4,000
Disabled Wife / Husband
3,500
Child age 18 years old and above, not married and receiving full-time tertiary education
1,000
Premium on new annuity scheme or additional premium paid on existing annuity scheme commencing payment from 01/01/2010 (amount exceeding RM1,000 can be claimed together with life insurance premium)
1,000

Friday, March 21, 2014

Credit Cards: The Basic of 0% Easy Payment Plans

It has become a norm for people of this generation to use credit cards. There are those who are very weak in managing their expenses that they blame the credit card as the culprit for their overspending habits. Everyone know that making a purchase that one cannot pay at the end of the month simply spell trouble in the long run. But what if you could take this card, and make it your best friend by spreading your repayments over the next few months of years, at 0% interest. This isn't a myth. Such a plan, which could be very common for this generation, the 0% Easy Payment Plan.

Here is one of brochure that I found in SenQ.

0% IPP for 36 months

If you are planning to buy the Apple iPhone 5S, please consider this option. Instead of putting in RM3149 at once to buy 64GB Apple iPhone 5S, you only have to pay RM87.47 on a monthly basis for 36 months. If you plan to put the RM2000 into FD first, you would have an additional RM60 assuming 3% interest. 

There are a lot of people who dislike using this feature in the credit card for fear of overspending. For those who have never heard of it, this blog post is for you...

WHAT IS THE 0% Easy Payment Plan?

This is a repayment scheme that allows you to use your credit card to make a transaction then repay the amount in installments over the course of months or years. This plan is done at 0% charge for the entire installment period.

Generally, this plan is only applicable to selected partnering outlets. 

THE BENEFITS of 0% Easy Payment Plan

You might have already guess this. With the 0% Easy Payment Plan, consumers will be able to pay for expensive items without incurring hefty credit card interest charges.

The other one would be as mentioned earlier: instead of paying one lump sum, you could actually put the money into a fixed deposit account that could help you to earn interests from banks.

HOW??

Knowing the benefits are great, but more important is how are you going to use it. First of all, it is important to make sure that the outlet is one of the partnering outlets with the bank of your credit card.

LOOK FOR STICKERS/SIGNS
Make sure to see this signage that indicate the 0% Easy Payment Plan

CHECK FOR T&C
Here is the tricky part. It is important to check with the outlet on the terms & conditions of the purchase. Here are some of the common ones that you should take note of:

a) Items that could be purchased with 0% Easy Payment Plan
b) Minimum purchase to be eligible for the plan
c) Installment periods that you can choose from
d) Extra charges when you use the 0% Easy Payment Plan

MAKE PAYMENT WITH CREDIT CARD, INDICATE USAGE OF 0% EASY PAYMENT PLAN

PAYMENT TO START ON NEXT CREDIT CARD BILL!

It sounds simple....but it is important for you to take note of a few things when you use the 0% Easy Payment Plan. I'll leave that for another post though. If you have yet to utilize this feature on your credit card, I suggest you look for it on the official website for the bank of your credit card to find more information. 

Monday, March 3, 2014

Managing your debt

To a lot of people, debt is a scary thing...but yet at the same time, it is a beautiful thing. Without debt, it would be very difficult for the middle class to consider earning property, vehicles and some other expenses. 

In our world today, with the credit card, there are so many ways for consumers, like you and I to manipulate future money in order to enjoy some of the luxurious goods. 

DEBT CAN BE YOUR BEST FRIEND


I have known people who disdain debt to a point that they would pay as much as they could as downpayment for a property even though most of the time, it only requires 10% of the property price. I have also known people who had piles of debts that it is impossible to settle it, and thus BANKRUPTCY. 

There is a simple rule of managing debt...DON'T SPEND MORE THAN YOU EARN, but it really isn't that simple, especially when you want to leverage on some of the low interest environment loan. If you only spend less than you earn, there is also a high likelihood of you missing the opportunity arises from leveraging on future money. 

Let's look at some examples: assuming that you are to buy a smartphone today, the high ends one, which cost us about RM2000 to RM2500. You have an option to pay the amount upfront or you could actually pay by installment...most of it are 0% as well, for up to maybe either 12 months or 24 months. I'll give you three different situation, calling them extra conservatives, reckless consumers and smart consumers. 

Situation A: The extra conservatives would pay upfront, because they are afraid of debt...thus only spending less than they earn, but they miss out on other opportunities. They could actually pay by installment and save the RM2000 or RM2500 on either FD (which only contribute 3% to it) or maybe some lower risk investments like stock markets or unit trusts. 

Situation B: The reckless consumers who failed to manage their debts wisely would opt for 12 months or 24 months installment, use the cash on hand to buy additional accessories. This would eventually lead to unsustainable debt in the future as one could easily overspend without knowing their own future cashflow estimates.

Situation C: The smart consumers would opt for either the 12 months or 24 months, and set aside the RM2000 or RM2500 for some savings on either FDs or unit trusts. But they would do more than that....they would actually record their cash flow for the future, and thus their debt could be monitored in a more systematic manner. 

From the scenario above, it is easy to see that debt might not necessary be a bad thing. It is how we manage our debt that make the difference. One of the most effective way to manage it is to treat our income, expenses and cash flow like how a company would do so....creating an Excel spreadsheet could help one to monitor easily and effectively. If you are overspending on your credit card, chances are you are not managing your debt effectively and could lead to a lot of unrest in the future. If you are those conservatives who are afraid of debt, I challenge you to start making use of our financial system to help you leverage your money. As for those of you who are smart consumers, maybe it's time to learn more on Excel to help you monitor your debt even more easier than it used to be. 

I will share some sample Excel spreadsheet that could easily help you to monitor your expenses, income and cashflow in the upcoming posts...stay tune!!