In fact, in order to save yourself from paying too much income tax, you will need to increase your spending most of the time. Let’s break it down to two major categories – the first consists of strategies that won’t require extra spending, the latter consists of strategies that require you to spend more in order to save the amount of tax payable.
Strategies that don’t require extra spending
- Stop being employed
- Start your own business
- Become a business owner
- Become an investor
- Become a boss
- Set up a company
All the above methods give you a whole new perspective. Your income will be taxed differently. Most of your necessary expenses will be tax deductible.
Just in case you are wondering what is the difference of all the above, they are actually the same. Businesses are being taxed differently by the government simply because they provide jobs to the people who like to be employed and pay more taxes.
However, for personal income tax planning, there are still a few methods that don’t require extra spending. But you will have to park your money in the right place:
- Save education funds in Skim Simpanan Pendidikan Nasional (maximum RM3000)
- EPF contribution and life insurance premium (maximum RM6000)
- Education plan and medical insurance premium (maximum RM3000)
- Ask your employers to reduce your monthly salary but increase your EPF contributions by the same amount
- Change “Fixed allowances” to “reimbursement” based on receipt
Strategies that DO require extra spending
- Donation to registered and approved charities under Section 44(6) of the Income Tax Ordinance
- Take up further education or professional courses
- Buy books, journals, magazines and other publications
- Buy sports and exercise equipment
- Pay your parents’ medical bills
- Do a full medical examination
- Pay Zakat (only applicable to Muslims)
- Buy a computer
- Hire a tax consultant
For more details of tax-saving methods, read 26 Ways to Reduce your Income Tax.
The problem of paying too much income tax is a good problem to have. Only high-income-earners face the trouble of paying too much tax money.
I would like to congratulate you if you think you are paying a lot of income tax. After all, that’s a “good problem” to be worried about.
Disclaimer: I am not a tax agent, nor tax consultant. I don’t even file my own income tax. (It is done by my accountant). This article just provides my general view about tax-saving methods. If IRB questions you regarding possible tax evasion or tax avoidance, please don’t tell that I teach you all these 🙂 Anything that is unsure, please consult a professional tax consultant.