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Extension of Individual Income Tax Relief for the National Education Savings Scheme

Updated: Nov 9, 2022

To Download Budget 2023 Speech and some other related publications - https://t.me/YourAuditor/3276

Current Position

Income Tax Relief up to a maximum of RM8,000 for deposits made by a person during the year of assessment into Skim Simpanan Pendidikan Nasional for his or her kid (reduced by any withdrawals during that year) is provided


The relief, which was going to expire in the year 2020, has been extended until the year 2022.


Previously, the amount of relief that could be granted was RM6,000. It is increased to RM8,000 from YA 2019.

Proposal

It is proposed that a tax relief of up to RM8,000 on net annual savings in the SSPN be extended for a period of 2 years.


This would be done in order to further encourage savings among parents in order to finance the higher education of their children.


Effective Date

From the year of assessment 2023 until the year of assessment 2024.


Example

Amer and his wife each opened their SSPN accounts in 2022 for their son who is 13 years old.


During the year, Amer deposited savings of RM4,800 and his wife deposited a sum of RM8,000. They did not make any withdrawals in that year.


Amer and his wife are assessed separately for the YA 2022.


Amer is allowed a deduction for his deposits in his SSPN account of RM4,800 while his wife is allowed a deduction of RM8,000 for deposits made by her for the YA 2022.


If Amir and his wife deposit their savings in 2023 and 2024, respectively, they will be eligible for a tax deduction of up to RM8,000 in 2023 and 2024. This will allow them to pay less in taxes.

Footnotes

SSPN is a saving scheme introduced by the Perbadanan Tabung Pendidikan Tinggi Nasional (PTPTN).


PTPTN was established under the Perbadanan Tabung Pendidikan Tinggi Nasional Act 1997 [Act 566].




SSPN was introduced to enable parents to save and eventually finance their children's education at higher learning institutions. To encourage individuals to deposit into SSPN account, paragraph 46(1)(k) of the ITA was introduced to allow a deduction for individuals who make deposits into the scheme.


The amount allowed as a deduction is the net contribution in the relevant year limited to a maximum of RM6,000 effective from the YAs 2012 to 2018. From YA 2019, the maximum amount of deduction for the net contribution is increased to RM8,000.


The net contribution is the amount of deposits made during a year reduced by the amount of any withdrawal made during that year.


SSPN accounts can be opened by parents for children aged 18 years and below and maintain the account until the child reaches the age of 29 years old.


Deposits made by parents to this account until the child reaches the age of 29 can be allowed as a deduction.


For children aged 18 years and above, they have the option to either open an account under their own name or under their parents’ name. If the account is opened under the child’s name, the child is not eligible for deduction on the deposit made into the account because the deduction under paragraph 46(1)(k) of the ITA is only eligible for the depositor who are the parents or the guardians. The parents are also not eligible for deduction since they are not depositor of the account when it is opened under the child’s name.


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