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Tax Relief on Voluntary Contribution to Employees Provident Fund

Updated: Nov 9, 2022

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

Current Position

Subsection 49(1) of the ITA provides that a deduction up to RM 7,000 can be claimed by an individual on –

  1. payment of premium on life insurance policy;

  2. contribution to an approved scheme (other than a private retirement scheme) made by the employee or by a self-employed person within the meaning of the Employees Provident Fund Act 1991 [Act 452]; or

  3. contribution made under any written law relating to widow, widower and orphan’s pension or under any approved scheme within the meaning of any such law.

To explain in a more layman's terms, individual income tax relief is given on contribution to approved provident funds such as Employees Provident Fund (EPF), takaful or life insurance premium payments as follows:-


From the year of assessment 2022, the scope of individual income tax relief for EPF contributors is expanded to include self-employed voluntary contributors including civil servants under the pension scheme up to RM4,000.


For civil servants under the pension scheme not voluntarily contributing to EPF, income tax relief on takaful contribution or life insurance premium payment can be claimed up to RM7,000.

Proposal

To further encourage voluntary contribution to increase savings in preparation for old age, it is proposed tax relief for life insurance premium or takaful contribution be restructured as follows:


This new treatment is applicable to civil servants under the pension scheme.

Effective Date

From the year of assessment 2023.



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