Consumer Mathematics: Taxation · Form 5
What is chargeable income?
Chargeable income is the part of your income that tax is actually calculated on, your total income after every tax relief you qualify for has been subtracted, not your full salary.
Income after reliefs, not your whole salary
Chargeable income is what is left after you take total income and subtract every tax relief you are entitled to. It is the figure the tax rate is applied to, so it is always less than or equal to your total income.
For example, if total income is RM50,000 and reliefs come to RM15,000, the chargeable income is RM50,000 − RM15,000 = RM35,000.
Why the tax is built on this figure
Tax is never charged directly on your gross salary; it is charged on chargeable income. Because the tax rate rises in bands, a smaller chargeable income can keep more of your income in a lower band and reduce the tax.
That is why knowing your chargeable income tells you much more than knowing your salary alone.
How to spot it in a question
In a question, look for the value that appears just before a tax rate or tax table is applied, that is the chargeable income. A common mistake is to apply the tax rate to total income; another is to confuse chargeable income with the final tax payable.
Chargeable income is an amount of income (ringgit of earnings), while tax payable is the amount of tax charged on it.
Source:DSKP KSSM Mathematics Form 4 and 5 (Versi English)
Frequently asked questions
Is chargeable income the same thing as my total annual income?
No. Chargeable income is what's left after every tax relief given in the question has been subtracted from total income, it's a smaller figure.
Using total income directly in the tax-rate calculation, without subtracting reliefs first, is the most common mistake in this topic.
Which figures in a question count as the reliefs I subtract to find chargeable income?
Only the specific relief amounts given in that question, don't assume or add in any figure that isn't stated. Reliefs might be listed separately (individual relief, EPF, and so on); add them together first, then subtract the total from the income given.
When several reliefs are listed, in what order do I subtract them?
The order doesn't matter, add all the given reliefs together into one total first, then subtract that single total from the total income once. Subtracting reliefs one at a time from a shrinking figure, or forgetting one of them, is where marks are usually lost.