As many of you may not be aware, there will be slight adjustments on the insurance tax relief as announced in Budget 2019. As a move by the government to encourage more people to get life insurance, Budget 2019 will seperate EPF and life insurance reliefs accordingly – EPF tax relief up to RM4,000 and Life Insurance and Takaful relief up to RM3,000. Do note that as these adjustments are only applicable for YA 2019 onwards, hence it will only be reflected for your tax filing next year. As you are filing for YA 2018 this year, tax relief for EPF and life insurance remains at a combined total of RM 6,000. Do click here for the full list of tax relief for YA 2018.
In this article we will be sharing with you the right way to file your insurance tax relief for both the categories (a) EPF and Life Insurance and (b) Education and Medical Insurance. The most common mistake made by Malaysians is to file the whole amount of insurance premium paid for the year. It is incorrect as there is actually a breakdown of figure that is allowed for tax relief, according to your own insurance plan. This breakdown can be found in your Statement of Life Assurance Premium Paid (SLAPP) provided by your insurance provider or agent.
However, even with this statement in hand, we realized that most Malaysians still repeat the same mistake as instructions stated in the statement can be quite confusing. Different type of insurance plan allows you to enjoy tax relief differently as well.
As seen above is a sample of SLAPP for an investment linked policy with and attached medical card. This is one of the most common plan that most of us own for medical card coverage, and also the most complicated one for tax filing. Most of us will claim the full RM3,000 under Education and Medical Insurance relief, which is incorrect. Look at the breakdown in the above statement.
Under this category, you will see an amount of RM344.80. This means that the whole amount of RM344.80 can be deducted for tax relief under the category EPF and Life Insurance. In circumstances where this category have been maximized by your EPF contributions, this RM344.80 shall deemed not claimable.
As for this category, you will see an amount of RM2,333,36. This means that the whole amount of RM2,333,36 can be deducted for tax relief under the category Education and Medical Insurance .
Similarly, under this category, you will see an amount of RM120.42. This category is a little bit tricky. If you choose to claim under the category EPF and Life Insurance, you may file the whole amount of RM120.42. However, in most common circumstances that you have maximized the relief with EPF contribution, you are also allow to file 60% of the amount under Education and Medical Insurance. This means that only RM72.52 (60% x RM120.42) is claimable under Education and Medical Insurance relief.
All amount stated in this category cannot be deducted for tax relief. As seen in the above statement, the whole amount of RM 201.42 is not claimable.
This category is commonly seen in endowment or investment plan specifically for education. There will be an obvious representation in the policy name such as “Edu”, “Scholar” and etc. A normal endowment or investment plan for savings purpose is not entitled for this category.
If you see this category in your statement, you may choose to claim 100% of the total amount under either EPF and Life Insurance or Education and Medical Insurance.
Let’s take a look at another sample. The above SLAPP sample is for a whole life plan. This is a more straightforward statement as the whole amount of premium paid for the year is claimable under the category Medical/Life. If you choose to claim under the category EPF and Life Insurance, you may file the whole amount of RM5,290 for this relief. If you have maximized this category, you can then file 60% of the amount under Education and Medical Insurance. This means that only RM3,174 (60% x RM5,290) is claimable under Education and Medical Insurance relief.
That’s it! It’s actually pretty simple once you understand how it works. All the best for your tax filing! Don’t hesitate to drop us any inquiry regarding this topic! Do subscribe to our site for more weekly articles!