Medical bills, rent and shares

More on what qualifies for tax deductions.

WITH the income tax deadline a mere day away, the Inland Revenue Board, coordinated by the board's corporate communications director Nor Azirah Mohd Said, tackles the final batch of queries.

> I am a teacher and have been giving tuition for 10 years. The classes are not consistent throughout the year, and the income generated is also not consistent. As there are no receipts issued to my students, I have not declared such income to IRB all this while. Did I go against the law?

It is a grave offence to under-declare your total income to IRB Malaysia. To give you an idea of how serious this is, Subsection 113(1)(a) of the Income Tax Act 1967 states that for making an incorrect tax return by omitting or understating any income, the amount of fine charged is a minimum of RM1,000 to RM10,000 plus 200% of tax undercharged. You are advised to prepare a statement of previous years' income from your tuition class and expenses incurred and inform the tax office that handles your file.

> My husband is paying for the monthly instalment of the house we are staying now. Is he entitled to deduct the annual interest incurred on his mortgage loan? Any entitlement for own home? How do we calculate?

Mortgage loan is not relevant to the relief provided under the housing loan interest relief.

> I have only one house but am not staying in it as it is in an unsuitable location. I have rented it out for RM600 per month. On the other hand, I am staying in a rented house and paying RM700 per month. Is the RM600 considered income since I own only one house?

Yes. Your rental income of RM600 must be declared even though it is the only one you own.

> I have a fully furnished semi-detached house rented out for RM4,000 per month. I have invested about RM80,000 on the furniture, air-conditioning, fridge, etc. Can the invested amount be deducted in the income tax? If yes, what is the deductible amount? For how many years?

No, capital expenditure is not deductible against rental income.

> Is the renovation for house rented, such as painting and build-in wardrobe, deductible from rental income?

Generally, expenditure wholly and exclusively used in the production of income is allowable deduction against the gross income (e.g. painting), unless capital in nature (e.g. built-in wardrobe). Please prepare a complete statement of income and expenses and seek further clarification from the tax office.

> If the rental income is not collected/received by the houseowner but by the owner's aunt (reason being the house is inherited from a grandparent and the aunt is collecting the rental), who should declare the rental income?

The owner of the house as stated in the Sale and Purchase Agreement is the rightful recipient of the rental income. Thus, the income from rental must be declared by the owner.

> Can I claim a deduction under purchase of personal computer if I buy a tablet PC?

Personal Computer means a desktop computer, laptop computer and handheld computer. But, it does not include computer accessories. [Income Tax (Exemption) (No. 4) Order 2008 P.U.(A) 191/2008].

With recent innovations in IT, the definition has expanded to include mobile computers like tablet PC, as long as the gadget does not include features of a mobile phone.

With reference to Paragraph 46(1)(j) Income Tax Act 1967, for purchase of personal computer for individuals, an amount limited to a maximum of RM 3,000 is deductible in respect of the purchase of a personal computer.

No deduction will be granted if the computer is used for business purposes. This deduction is allowed once in three years.

> Can you please tell me if non-Muslim contributions to religious organisations (e.g. churches, temples, etc) are tax deductible? I remember the Prime Minister mentioned this during the presentation of the 2012 Budget in Parliament last year.

Such contributions are tax exempt provided the religious organisations receive approval from IRB. Please refer to the Technical Guideline on Application for Approval under Subsection 44(6), ITA 1967 to learn more about tax-exempt organisations.

> I retired 10 years ago at the age of 55. Together with my wife, we withdrew all our EPF which amounted to slightly more than RM300,000 and with my savings of about RM200,000, I invested part of it in stocks and shares which have appreciated since. Will I have to show proof if I buy a car (at about RM80,000) and a house (at RM500,000) by paying all in cash?

As long as you have documentary proof of payment when requested, there is no necessity to inform the tax office of your purchase.

> My husband is 64 years old and a retiree. I am 58 and still working. My husband underwent angioplasty after a heart attack 10 years ago and relies on regular medical check-up as well as medication for his heart, diabetes, high blood pressure and psoriasis. Can I claim for his medical bills and medicine (including that bought from the pharmacy) under item D6 “Perbelanjaan perubatan bagi penyakit yang sukar diubati atas diri sendiri/suami/isteri atau anak terhad RM5,000”.

I checked with IRB Jalan Duta and IRB Kampong Attap by phone and received two different answers. IRB Jalan Duta said I cannot claim while Kampong Attap said I can. I am confused.

Purchase of doctor-prescribed medication from the pharmacy is eligible for relief under medical expenses for serious diseases. Refer to the Technical Guideline for Serious Diseases in www.hasil.gov.my.

> I am an executive director of a company (Sdn Bhd) of which I am also a shareholder. Are my medical expenses (drugs, doctors, MRI's and hospital expenses) considered as company expenses?

Some have told me No' as all medical expenses of directors/shareholders are not considered as company expenses. My question is, shouldn't I be entitled to the same medical care as my employees? Please advise.

If the employee has control over his employer, the allowances/perquisites/gifts/ benefits received by him is taken to be part of his employment income and subject to tax.

Control over his employer' means:

(a) for a company, the power of the employee to secure, by means of the holding of shares or the possession of voting power in or in relation to that or any other company, or by virtue of powers conferred by the articles of association or other document regulating that or any other company, that the affairs of the first mentioned company are conducted in accordance with the wish of the employee;

(b) for a partnership, the employee is a partner of the employer; or

(c) for a sole proprietor, the employee and the employer is the same person

> I understand that Internet usage is tax exempted. What if the Telekom bill is not under my name but my father's?

> I subscribe to three Celcom broadbands for my family. Each broadband fee cost me about RM70 to RM90 per month excluding the usage bills. How much tax deductions can I enjoy?

The deduction/exemption allowed is limited to RM500 a year for broadband subscriptions that are registered in the name of the individual.

> If I build my own personal computer, without monitor, keyboard, mouse and speaker (but just the CPU), is it eligible for tax relief?

The claim for the relief of purchase of computer will only be allowed if the purchases, done separately, are meant for assembling a full set and made in the same year.

> Since assessment year 2004, income received in Malaysia from outside Malaysia is exempted from tax. I am a consultant for a company outside of Malaysia with no local entity. My consultancy fees are remitted to my local bank account. This is my only source of income. Do I still declare tax? Or do I declare zero tax?

Income received and remitted from outside Malaysia by a resident individual is exempted from tax provided that if the same employment is exercised in Malaysia, the income derived from that source is taxable in Malaysia. It is not necessary to declare the remitted income; suffice to provide documentary evidence in the event of an audit examination.

> In a gated and guarded community, the joint management body collects service charge and sinking fund. The amount from the sinking fund is placed in fixed deposits. Does the interest earned attract income tax? Also, does the surplus arising from the difference on the service charges collected and the expenditure attract income tax?

Income in respect of interest received by individual residents in Malaysia from money deposited with recognised financial institutions in Malaysia is tax exempt with effect from Aug 30, 2008. However, if the motive of the management body is established as a profit-making venture, all gains are taxable after deducting allowable expenses.

> Where do I fill up the professional membership fee?

Membership Subscription paid to professional bodies to ensure the continuance of a professional standing for practice, such as the medical or legal profession, can be claimed as a deduction. There is no field to input professional fees, therefore deduction from the gross employment income is allowable before keying in the nett income under employment field.

> I'm currently unemployed but am trading in our Bursa Malaysia. I was told there is no tax for gains made from stock market trading as it is capital in nature. At the same time, I was told by others that stock market trading gains is taxable. Can you enlighten me on this? If it is taxable, then what about the losses incurred from stock market trading? Is the loss deductible, or can it be carried forward to offset the gain made?

If you trade regularly in the stock market and incur expenses in deriving the income, the gains are taxable after deduction of expenses. Similarly, losses suffered can be carried forward to the following year to offset against the profits of that year.

> In my EA form, there is an amount of RM1,000 under Jumlah Elaun/pemberian/manfaat yang di kecualikan cukai. Do I need to separate it from the total gross salary?

If your employer has separated the exempt amount in your EA Form, it is not necessary to deduct it from your total gross salary. However, to verify the status of the exempt income, it is necessary to obtain confirmation/documentary evidence from your employer the basis of such exemption.

> The university fees for my son at UTP amounted to RM7,000 last year. Is this tax deductible? How much I can deduct?

It is not tax deductible. However, you can claim Child Relief for children 18 years and above in tertiary education up to a maximum of RM4,000.

> I have five funds under a unit trust agency, and my total investment as at December 2011 is about RM460,000 via EPF and cash. From the latest statements, I only made profit of about 1.5%. I have received statements from the agency stating that it had paid tax on those investment while my unit trust consultant said that I can enjoy some tax relief on this.

Profits from unit trusts are taxed at source. Tax relief under section 110 of ACP 1967 is possible only if the agency issues dividend vouchers and you declare the income in your tax return.

> If the car and petrol allowance as reflected in the EA form is RM6,500 and this is for official duty, can RM6,500 be deducted from chargeable income?

Car allowances are taxable while petrol allowances are exempted but limited to RM6,000. The employee is required to make an official claim if the benefits received are more than the limited amount. Please keep proper records for purpose of audit examination. Refer to the Public Rulings Fourth Addendum No. 2/2004 for more in-depth explanation.