08 April 2011

Personal Income Tax 2010: Residential Property

With effective from Year of Assessment (YA) 2009, Malaysian resident who acquired any residential property are given the specially designed tax relief of up to RM10,000 a year for 3 consecutive years from the first year the interest is paid.

Residential property means a house, condominium unit, apartment or flat which is built as a dwelling house. This kind of tax relief was given by the Government to counter the property market downturn, or to spur the property mart after the 2008 global financial crisis. It has proven to be a success in Malaysia for the past 2 years, where property prices skyrocketed to a not so comfortable level for most of Malaysians. People are crying foul on the high price to own a house nowadays.

What is the Terms and Conditions?
To qualify for the tax relief, the following conditions must be met:
  • the taxpayer is a Malaysian citizen and a resident;
  • limited to one residential unit;
  • the sale and purchase agreement is signed between 10th March 2009 and 31st December 2010;
  • the individual has not derived any income in respect of that residential property
How about Joint-Ownership property?
Yes. You still will entitled for the interest expended tax relief where:
  • 2 or more individuals are eligible to claim relief for the same property; and
  • where the total interest expended by those individuals exceeds the allowable amount for that year, each individual is allowed an amount of relief for each year based on the following formula:
In other words, the total interest expended would be RM10,000 per house, and it can be proportionate in accordance to the number of individuals. Example, Alex and Esther purchased a house, and the finance interest incurred for that year of assessment amounts to RM30,000. Alex only pays 30% of the installments while Esther paid the remaining 70%.
So, for that YA, Alex would entitle for RM3,000 interest relief while Esther would get RM7,000. If both of them already married, and if Esther elects for joint assessment, then RM10,000 would be given to Alex.

Source: Inland Revenue Board website

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1 comment:

  1. Hi Alex.. I just browse thru your post regarding the residential tax relief, It is so true that the formula stated in the income tax leaflet or LHDN website.. but sadly.. this format are not applicable since the year 2010.

    I call to income tax department regarding this matter.. but the person incharge mention, they are not using this formula for the joint ownership. the interest will devide accordingly base on how many ownership. so.. it is in equevilent portion. so.. for example the finance interest for the house on year 2011 is 12k. the property is under husband n wife name, then the amount u can insert for each individual is only 6k for the year.

    I also hope the formula is working like what u have written in the post.. so my husband can take full the rm10k tax relief.

    but.. the piece of information I get from LHDN officer will overtake the written formula..

    Can you help me to clarify on this tax matter? Thanks alot!


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