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Amendment to deduction from remuneration rules
The Income Tax (Deduction from Remuneration) Rules 1994 (Amendment) 2021 [P.U.(A) 123] were gazetted on 19 March 2021 and amend the Income Tax (Deduction from Remuneration) Rules 1994 [P.U.(A) 507].
The Income Tax (Deduction from Remuneration) Rules 1994 provide that the employer must determine and make monthly tax deductions (MTD) from employees’ salaries based on either the MTD Schedule or the computerized calculation method. The Schedule is issued to employers who do not use a computerized payroll software. However, employers using the Schedule are advised to use the computerized calculation method if the employee receives a salary adjustment, elects for optional deductions or commences employment other than in January.
The 2021 amendments take into account the following:
- The tax rate reduction of one percentage point, from 14% to 13%, for resident individuals with chargeable income between RM50,001 and RM70,000. This is effective from YA 2021.
- The “life insurance premium” component is excluded from the formula in determining the amount of monthly tax deduction, effective from YA 2019.
- The amendment rules stipulate that the minimum amount of monthly tax deduction based on the computerized calculation is RM10, effective from 1 January 2021.
The amendment rules stipulate that the “Table of Monthly Tax Deduction” will be issued by the Inland Revenue Board (IRB) in an electronic medium. This is deemed to have come into operation on 1 March 2019.