Do you know how to reduce your income tax payable but increase your retirement fund at the same time?

Yes, you can achieve both wishes in one action.

The voluntarily retirement saving scheme also known as Private Retirement scheme, is first introduces in Oct 2011. As many studied and research have proven that majority of malaysian’s existing retirement saving with EPF will only be able to last less than 4.5 years.

To incentivize participation in Private Retirement Schemes, individuals are granted tax relief of up to RM3000 and employers are provided tax deduction on contributions to Private Retirement Schemes made on behalf of their employees above the statutory rate and up to 19% of employees remuneration. Tax exemption is also provided on income received by the Private Retirement Schemes funds. 


For simple illustration, Mr. A annual income is RM120,000 and income tax payable shall be RM13,540 based on the personal tax rate 2019 who only claim on personal relief RM9000.

After financial planning, Mr. A has realized that he will required to save more money in order to achieve his retirement objective. Thus, he has decided to take up Private Retirement Scheme (PRS) as his alternate retirement saving tool. Also, he has already contribute into this account whenever he has additional cashflow. In 2019, Mr A had build additional RM12,000 of retirement fund also reduce his income tax payable from RM13,540 to RM12,820.

The amount save from the tax expense has reach up to RM720 or 5.3% p.a, which is a great tool to increase your retirement fund also saving on your income tax payable.