(Image: 123rf/Hafiz Ismail)
Tax deductions function by lowering your taxable income, applicable to both individuals and businesses. Businesses can claim deductions in certain expense categories, potentially reducing their tax liability. A significant area for claiming deductions is through donations and gifts.
The Inland Revenue Board (LHDN) has outlined 9 categories of donations, gifts, and contributions that are eligible for tax deductions in the 2024 assessment year.
| Contribution |
| Gift of money to the Government, State Government or Local Authorities |
| Gift of money to Approved Institutions or Organisations (amount is limited to 10% of aggregate income) |
| Gift of money or cost of contribution in kind for any Approved Sports Activity or Sports Body (amount is limited to 10% of aggregate income) |
| Gift of money or cost of contribution in kind for any Approved Project of National Interest Approved by the Ministry of Finance (amount is limited to 10% of aggregate income) |
| Gift of artifacts, manuscripts or paintings |
| Gift of money for provision of Library Facilities or to Libraries |
| Gift of money or contribution in kind for the provision of facilities in Public Places for the benefit of disabled persons |
| Gift of money or medical equipment to any healthcare facility approved by the Ministry of Health |
| Gift of paintings to the National Art Gallery or any State Art Gallery |
How Much Can You Deduct?
It’s important to note that donations are generally subject to limits based on your total taxable income. For instance, gifts to certain categories of organisations may be capped at 10% of your aggregate income. Be sure to verify the limits for each donation category to ensure compliance with LHDN regulations.
Documentation Requirements
To claim your tax deduction, you must maintain proper documentation. This includes receipts or acknowledgment letters from the recipient organisations, which should include their LHDN registration number, the amount donated, and the date. Without these documents, your donation may not be accepted for tax deductions.
Checking Recognised Institutions
To determine if the institutions, organisations, or bodies you are donating to are recognised by LHDN, you can visit their official website for a comprehensive list. Keep in mind that donations made to organisations or charity bodies that are not listed by LHDN will not be eligible for tax deductions. For businesses, donations made to registered organisations can also help reduce taxable income, so it’s important to keep detailed records of all charitable contributions.
(Source: LHDN)
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