Page 87 - DCOM301_INCOME_TAX_LAWS_I

Income Tax Laws – I

Notes We can advise our employees on these useful matters. They will be happy. We also can
convince and educate them that tax evasion is unethical but tax avoidance and tax planning
are acceptable. Please illustrate with figures for all the above tax jargons.”
“Sure, but give me at least one week to come up with all details because I have to update
myself with the latest tax enactments,” Khir replied.
The following week Ravi received a call from Khir. He confirmed that he had prepared ten
different salary schemes with the same gross total income of RM 200,000, but with different
allowances, perquisites (PER) and benefits-in-kind (BIK).

He explained to Ravi that employees could get paid by employers in different forms and
how these payments were taxed under the Income Tax Act. He provided the following
table which provided all relevant details in matrix form.

Assumptions given:
1. All employees receive the same gross income of RM200,000. The payment method is
different. The savings remain the same. For instance, all employees save:
(a) RM4,000 in EPF payment,
(b) RM2,000 for purchase of one notebook (computer),
(c) RM1,000 for donations to the Government, and
(d) All employees claim that the entertainment allowance (EA) was fully spent on
entertaining company’s clients.
2. Employee 1 (E1) gets his gross salary in two forms: RM190,000 as salary and RM
10,000 as EA.
3. Employee 2 (E2) gets RM154,000 as salary, RM10,000 EA and requests that his employer
contribute to his approved provident fund account the sum of RM3,000 monthly.
4. Employee 3 (E3) receives RM 118,000, RM10,000 and RM36,000 as salary, EA and rent
free accommodation (RFA) and also requests his employer to contribute to his
approved provident fund account the sum of RM3,000 monthly.
5. Employee 4 (E4) receives house rent allowance (HRA) instead of RFA for the same
value as employee 3.
6. Employee five (E5) gets the same allowances as E4 but RFA and his salary is further
reduced as he gets travelling allowance (TA) of RM 24,000 for private purposes.
7. Employee six (E6) gets the same allowances as E5 but gets HRA instead RFA.
8. Employee 7 (E7) receives RFA and a car valued RM130,000 (company charges RM
10,000 pa for the car), fuel and driver for RM28,000 instead of travelling allowance.
Contd...

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