How do I calculate my Malaysia tax refund?

Are you wondering how to calculate your Malaysia tax refund? It’s a common question for many taxpayers. A tax refund means you’ve paid more income tax than you owe. This often happens because your employer’s Monthly Tax Deduction (MTD) doesn’t account for all the tax reliefs you’re entitled to. Understanding the process can help you get the money you deserve back from the Inland Revenue Board of Malaysia (LHDN).

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Step-by-Step Guide to Calculating Your Tax Refund

Follow these steps to figure out your refund. The easiest way to complete this process is by using the official LHDN e-Filing system, which automatically handles the calculations for you.

1. Find Your Total Annual Income: Start with the total gross income from all your jobs, including salary, bonuses, and allowances. This figure is available on your EA Form, which your employer must provide by the end of February.
2. Determine Your Chargeable Income: This is the amount of income that will actually be taxed. To get this number, subtract all your eligible tax reliefs and tax deductions from your total annual income.
   • Common Tax Reliefs:
     • Individual Relief: RM9,000 for every taxpayer.
     • Life Insurance & EPF: Up to RM7,000 combined.
     • Lifestyle Relief: Up to RM2,500 for books, gym memberships, and internet.
     • Medical Expenses for Parents: Up to RM8,000.
     • Child Relief: Various amounts depending on your child’s age and education.
3. Calculate Your Tax Payable: Use the official LHDN tax rate schedule to apply the correct progressive tax rates to your chargeable income. This will give you your final tax amount for the year.
4. Compare and Get Your Refund: Subtract your final tax payable from the total amount of tax your employer deducted from your salary throughout the year (your total MTD).

Your Tax Refund = Total MTD Paid – Final Tax Payable

If the result is a positive number, congratulations, you’re getting a refund!

Real-Life Examples

Example 1: The First-Time Taxpayer

• Situation: A fresh graduate earns a total annual income of RM45,000. They have no dependants and claim the standard Individual Relief (RM9,000) and EPF contributions (RM4,000). Their total MTD for the year was RM1,200.
• Calculation:
  • Chargeable Income: RM45,000 – RM9,000 – RM4,000 = RM32,000
  • Tax Payable: Based on the LHDN tax schedule, the tax on RM32,000 is RM400.
  • Refund: RM1,200 (MTD paid) – RM400 (Tax Payable) = RM800. This person is due a tax refund of RM800.

Example 2: The Family Man

• Situation: A father of two earns a gross annual income of RM120,000. He claims reliefs for himself (RM9,000), his wife (RM4,000), two children (RM2,000 each), life insurance (RM5,000), and lifestyle expenses (RM2,500). His total MTD for the year was RM9,500.
• Calculation:
  • Chargeable Income: RM120,000 – (RM9,000 + RM4,000 + RM4,000 + RM5,000 + RM2,500) = RM95,500
  • Tax Payable: Based on the LHDN schedule, the tax on RM95,500 is RM9,240.
  • Refund: RM9,500 (MTD paid) – RM9,240 (Tax Payable) = RM260. He will receive a refund of RM260.

FAQ Section

Q: How long does it take to get my tax refund from LHDN?

A: LHDN typically processes refunds from e-Filing submissions within 30 working days. For manual submissions, it may take up to 90 working days.

Q: What is the main reason I might get a tax refund?

A: The most common reason is that your employer’s MTD does not account for all the personal tax reliefs you are entitled to, such as for books, medical expenses, or insurance premiums.

Q: Can I get a tax rebate on zakat contributions?

A: Yes. For Muslim taxpayers, zakat payments can be claimed as a full tax rebate, reducing your tax payable Ringgit-for-Ringgit.

Q: What is the difference between tax relief and tax deduction?

A: Tax reliefs reduce your chargeable income, while tax rebates directly reduce the amount of tax you have to pay.

Q: Why is my MTD sometimes higher than my actual tax payable?

A: MTD is an estimation based on your monthly income and some basic reliefs. It doesn’t factor in specific annual reliefs you can claim later, such as for lifestyle expenses or parent medical care, which is why a refund is often due.