The TP1 is an income tax form that is given to the employer by the employee to ensure that the MTD (monthly tax deductions) have taken into account the necessary rebates and deductions. This allows the employee to claim any TP1 item for a specific month or a specific period, on an annual basis. This is an optional tax rebate scheme.
In January, Ali purchased:
- A new smartphone to support his children’s online education amounting to RM1,200
- He also went for a full medical checkup amounting to RM800
He notifies the HR Admin about these additional reliefs, and HR Admin adds TP1 item as below:
- “C12-for lifestyle” in January with the tax relief amount RM1200 out of the RM3000 max limit
- “C5-for medical checkup” in January, with the tax relief amount RM800 out of the RM1000 max limit
In total, Ali is entitled to an additional tax relief of RM2000 which will decrease his chargeable income for January.
Apart from the optional tax relief above, the TP1 Tax Relief component also caters to tax rebates for Muslims who personally contribute their Zakat out to the Islamic institution.
In this case, Ali has contributed RM200 separately for Zakat purposes. To ensure no double taxation, and to claim the Zakat amount he contributed earlier, he notifies the HR Admin. HR Admin then adds:
"D1(a)- for Zakat” in January, with the tax rebate amount of RM200.
This rebate will directly decrease his Monthly Tax Deduction amount for January.
To learn how to add items for tax rebates/reliefs, read this article.