CHARGEABLE INCOME

SEC. 5 (1)
Computation of Chargeable Income
Steps
– Determine the basis period of the income of a
person
– Gross Income
– Adjusted Income
– Statutory Income
– Aggregate Income
– Total Income
– Chargeable Income
 Basis of Assessment

• Basis year vs. Basis period

– Basis year refer to the calendar year
– Basis period is the calendar period (12 months)
– Ex. Basis year 2018 is a period starting from 1 Jan.
2018 to 31 Dec 2018.
 Basis of Assessment

• Tax is assessed in respect of a year of

assessment; i.e a calendar year.
• Before year 2000 - Preceding year assessment
• Starting from year 2000 - Current year
assessment
 Preceding year vs. Current year of
assessment
• Preceding year assessment
– The imposition of income tax is a year later than
the derivation of income
– Y/A 1999 cover income for basis year 1998 from a
basis period starting 1 Jan. 1998 to 31 Dec 1998.
– Y/A 2000 - a period from 1 Jan. 1999 to 31 Dec
1999
 Preceding year vs. Current year of
assessment
• Current year assessment
– Starting from Y/A 2000
– The assessment of income tax to be concurrent with the
derivation of the income
– Y/A 2000 - a period from 1 Jan. 2000 to 31 Dec 2000
– Y/A 2001 cover income from basis period starting 1 Jan.
2001 to 31 Dec 2001
• Gov. has granted a waiver of income tax for the Y/A
2000 on the preceding year basis to relieve taxpayer
from paying two years’ income tax within a year.
 Basis year/basis period

• Individual include sole proprietor and partners

in partnership, deceased persons, clubs and
trade association
– -> calendar year
• Com., trust, co-operative society
– > it can be either calendar year or, its
financial year
 CHARGEABLE INCOME
• Ways to ascertain chargeable income;
1. Determine gross income from each source (Sec. 4(a)
to 4(f)
2. Determine adjusted income from each source
After deducting
• allowable expenses
• Double deduction
• Special deduction
If total deduction is greater that gross income,
adjusted income will be ‘nil’.
For business income, this deficit is known as
‘adjusted loss’, that can be off set against ‘aggregate
income’.
 CHARGEABLE INCOME

3. Determined Statutory income / aggregate statutory

income ( if has more than 1 business)
• Adjusted income less capital and balancing allowance and
add balancing charge
• Less unabsorbed business loss
4. Determined aggregate income for relevant year of
assessment
• Aggregate statutory income add other income (non-business
income)
 CHARGEABLE INCOME

5. Total income /chargeable income (for company)

• Aggregate income minus
– current year business loss
- approved donation (s44(6)- 44(11C)
- Group loss relief (s 44A)
6. Chargeable income for that year
• Total income after deducting personal relief for individual
resident in Malaysia.
 Total income (s. 44)
• Total income is the residue of aggregate
income after deducting the following:
– Adjusted business loss for the period ( s.44(2))
– Prospecting expenditure (Sch.. 4) – (for company
only)
– Qualifying pre-operational business expenditure
(Sch. 4B) – (for company only)
– Approved donation under S. 44(6) – 44(11A)
– Group loss relief S.44A – (for company only)
 Approved donationS. 44(6) – 44(11A)
Deduction against Aggregate income
• Donation is not revenue expenses- CSR
• Sec 364(6)- CSR payment would be accorded full revenue
deduction
• Approved cash donations are allowed against aggregate
income
• Unabsorbed donations are permanent loss.
• S. 44(6) - Cash donation to Government, State Government,
local authority.
• However, w.e.f YA 2009- cash donation to approved
institution is limited to 10% of the company’s aggregated
income and for non-company limited to 7% of aggregated
income
 Approved donation
• S. 44(6A)- Donation of artifact, manuscript or painting to
Government or State Government, the value would be
determined by the Department of Museums and Antiquities or
the National Archives.

• S. 44(8)- Cash donation (restricted to RM 20,000) for the provision

of library facilities to public or school libraries, university or
colleges.
– Tax planning- claimed under allowable expenses: Max
RM100,000 [S. 34(6)]
 Approved donation
• Donation by individual
– S.44(9)- Cash or in kind (value to be determined by the relevant
local authority) for the provision of public facilities in public
places for the benefit of the disable persons.
– S. 44(10)- Donation to healthcare facilities : Cash or in kind of
medical equipment (value to be certified by Ministry of Health)
Max: RM 20,000 for the approved healthcare facility.
• S.44(11)- Donation of painting (value to be determined by the
National Art Gallery or State Art Gallery) to the National or State
Art Gallery.
• S. 44(11A)- Zakat perniagaan paid by a company, trade, club, co-
operative society : Max 2.5% of the aggregate income.
• S. 44(11B)- Contribution to approved sports activity,