Sunday, November 23, 2008

Less EPF Cut Means More Income?

Many people have been thinking of getting the extra income come 1 Jan 2009 when the mandatory Employees' Provident Fund ("EPF") deduction is reduced to 8% of the gross salary instead of the current 11%.

We take a case study to see the benefit that could be derived if your monthly basic salary RM4,000:-

- If your monthly EPF contribution is 11% (RM440), taxable income = RM3,560, income tax payable = RM77.

- If your monthly EPF contribution is 8% (RM320), taxable income = RM3,680, income tax payable = RM109.

Conclusion: If you choose to contribute 8%, you will end up paying more income tax to the government, which will make the government richer.

Finance Minister Najib said this measure is meant to boost up the slow-down market, but from this example we see that the money does not go into the market. Instead the money goes direct into the government's pocket through the greater amount of income tax that we will have to pay. Obviously this measure does not help the market at all.
Tags: EPF, Employees' Provident Fund, Taxable Income, Malaysian Income Tax

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6 Comments:

Blogger TZ said...

It's true... we will pay more income tax ... maybe it's just the hidden agenda from the government ... hahaha :-p

23 November, 2008 13:07  
Blogger Borneo Falcon said...

Guess I will keep my EPF contribution at 11%

23 November, 2008 13:15  
Blogger Life Ramblings said...

i guess majority of the contributors will stick to the status quo.

23 November, 2008 22:35  
Blogger Johnny Ong said...

tz - just hope that people will make the right choice

borneo - right on mate

life ramblings - hopefully they knew what they are getting into if they opt for 8%

24 November, 2008 02:58  
Blogger Jason Law said...

Government never cares about people, they are just taking care of their own pockets!

24 November, 2008 20:24  
Blogger Johnny Ong said...

jason - pls forgive the govt as i think the govt didn't see this aspect at all

25 November, 2008 01:15  

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