ZAKAT & TAX PLANNING

Below shown some example calculation of tax and zakat for individual.

EXAMPLE:

Mr. Salahuddin works as architect at one of the private sectors in
Melaka. He is married with Sarah and has three children together.
Their children aged 15 years old, 10 years and 7 years old. His
youngest children’s is disable child. Mr. Salahuddin annual income is
RM 115,000 and he got RM 5,000 as a bonus payment in 2020. His
total Schedule Tax Deduction (STD) for Mr. Salahuddin is RM 1,500

Below show the other expenses of Mr. Salahuddin for the year of 2020.

Medical equipment for his child RM
Family Medical Takaful 2,500
Contribution 4,500
Personal computer
Payment for internet 3,000
subscription 2,400
Medical fees for his father
Zakat payment 2,000
4,000

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Step 1: Calculate total income RM
115,000
Annual income
Bonus 5,000
TOTAL ANNUAL INCOME 120,000

Total annual income
only included income
and bonus only

Step 2: Calculate total tax relief

o Amount of the all items must be referred to tax relief table on year of
assessment.

TAX RELIEF RM For takaful contribution,
9,000 Mr. Salahuddin restricted
Personal relief 6,000 to RM 3000 as he came
from private sector 2,500
Medical equipment for his 3,000 even the exact amount is
more than that
child 2,500
For lifestyle, Mr.
Family medical takaful Salahuddin only
can claim for tax
contribution (restricted) relief restricted to
RM 2,500 even the
Lifestyle (Personal exact amount is
more than that
computer and Payment for
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internet subscription)

(restricted)

Medical fees for his father 2,000
Child under the age of 18 4,000
years old (2000 X 2)
Disabled child 6,000
TOTAL TAX RELIEF 32,500

Step 3: Calculate tax due RM From total
120,000
Total annual income (32,500) income subjected
(-) total tax relief 87,500
Total income subjected to tax, Mr.
to tax 4,600
On the First 70,000 3,675 Salahuddin can
Next RM 17,500 x 21% 8,275
Tax payable 1,500 refer to tax rate
(-) schedule tax
deduction 4,000 schedule for the
(-) zakat 2,775
Tax due tax payable

amount

For tax due, the
tax payable
deduce schedule
tax deduction and
zakat

Total tax due must be paid by Mr. Salahuddin is
RM 2,775

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ISSUES ON ZAKAT AND TAX PLANNING

Zakat and tax planning play a crucial part in the Islamic financial planning. This
is because zakat and tax planning consider as one of the tools for the Muslim to
manage their wealth as there are some part of our wealth belong to others. For
the zakat and tax planning, there are some issue arises and this issue need to be
resolved swiftly before it become worse.

ZAKAT AND TAX PLANNING ARE KNOWN AS
WEALTH PURIFICATION

In Malaysia, the Management of Zakat is based on state and every

state has different style of management that lead to some issues. However, this
issue still under control and the management accomplish a good job in prevent
the issue become massive. Furthermore, the distribution of zakat is considered
as one of issue for zakat as the zakat payers inquiring whether their contribution
attain to the recipient or otherwise.

Regarding the distribution of zakat matter, the management of

zakat administration has properly explained to the zakat payers that all the
collection of zakat would reach to the zakat recipients without any problem. All
the zakat administration in Malaysia give full commitment in order to ensure a
well distribution of zakat collection become a fact. Zakat administration also
came forward actively to identify the zakat recipient and prevent from any
eligible recipient forsake.

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ISSUE OF TAX
PLANNING

TAXPAYER’S DEFAULT EXEMPTION OF TAX
IN SELF-ASSESSMENT BY TAXPAYERS

SYSTEM

From the tax planning perspective, there are some issues arises as some
taxpayer’s default in managing their taxation through Self-Assessment System.
There are certain taxpayers did not claim all the rebates and relief that provided
as they are not well informed regarding that matter. For this issue, IRBM must
be strive for the best practice to ensure all the taxpayers has a proper knowledge
about the usage of tax relief. Tax relief is considered one of the benefits
appreciated for the taxpayers and taxpayers encouraged to fully utilized tax
relief incentives

Furthermore, for the tax planning issues happen when taxpayers change the
nature of income or profit from taxable to exempt and take advantages of
incentives and concession in tax provisions to reduce tax obligations. If the
changing happens due legal execution, this action would not be considered as
wrong. Otherwise, if the illegal action occurs, the taxpayers would face a severe
punishment by the IRBM. The general tax knowledge has a very close
relationship with taxpayers’ ability to understand the laws and regulations of
taxation, and their ability to comply with them. Knowledgeable taxpayers can
prevent from any illegal action like tax evasion or tax avoidance happen in the
future.

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References

Aziz, M. R. A., Ali, A. F. M., & Johari, F. (2021). Zakat’s Economics &
Poverty Alleviation Among Muallaf (1st ed.). Penerbit Universiti Sains
Islam Malaysia (USIM).

Shafii, Z. (2016). Islamic Financial Planning and Wealth Management.
IBFIM.

Abdo Yousef Qaid Saad, A. M. (2020). Zakat and Tax: A Comparative
Study. International Journal of Innovation, Creativity and Change, 142-
151.

J. Muharani, N. A. (2020). Integration of Zakat and Tax for Economic
Development. Jurnal Syarikah P-ISSN 2442-4420 e-ISSN 2528-6935
Volume 6 Nomor 2, 197-203.

Mohd Rizal Palil, 1. M. (2016). Issues, Challenges and Problems with
Tax Evasion: The Institutional Factors Approach. Gadjah Mada
International Journal of Business, 187-206.

ISLAMIC FINANCIAL PLANNING

Zakat and tax planning caters for the Islamic banking courses taken by
students at institutions of higher learning. This book consists two main
topics, which are zakat planning and tax planning in Malaysia. For topic
related to zakat planning discussed about the meaning, types of zakat,

recipients of the zakat and latest issue of zakat in Malaysia.
Subsequently, the topic related to tax planning discussed about the
regulatory bodies that manage tax and the latest tax system in Malaysia.







Key features
o Based on the latest polytechnic syllabus of Islamic Financial Planning subject
that consists the topic regarding zakat and tax planning.
o Provide the latest information of zakat and tax planning in Malaysia.
o Provide review question to evaluate student understanding.

Mohammad Firdaus Ahmad, holds Master in Islamic
Economics from Universiti Kebangsaan Malaysia (UKM) and
Degree in Business Administration (Hons) (Islamic Banking)
from Universiti Teknologi Mara (Uitm). He began his teaching
career as a lecturer at Politeknik Sultan Idris Shah (PSIS),
Sabak Bernam Selangor and already has 10 years’ teaching
experience is Islamic banking courses.

Siti Nasuha Mohbin, holds Master in Islamic Banking and
Finance from Universiti Teknologi Mara (UiTM) and Degree in
Business Administration (Hons) (Islamic Banking) from same
university. She began her teaching career as a lecturer at
private college in 2017 and presently work as lecturer at
Politeknik Sultan Idris Shah (PSIS), Sabak Bernam Selangor.
She has 4 years’ teaching experience is Islamic banking
courses.