The Dreaded CP38 Clause By LHDN

My joy of annual salary increment has been shortlived.

I kinda' expected it already.

Last night when I reached home and upon checking the mailbox, I already saw a white and sleek envelope with the official franking "Urusan Seri Paduka Baginda" ("On His Majesty's Service").

I knew it even before I opened it. This was surely the dreaded love letter from Lembaga Hasil Dalam Negeri (Inland Revenue Board - IRB).

It was the compulsory CP38 deduction schedule required of me to settle the balance of my income tax for the last assessment year, amounting to RM1,684.44. The deduction imposed by IRB from my monthly salary will begin in September this year and ends in March next year. IRB will deduct RM240.00 every month and RM244.44 as the final instalment in March 2010.

It's my fault actually and I bet that I'm not the only one. Once you file your tax returns in late April, you are required to quickly pay the "Cukai Kena Dibayar" or "Tax Payable" to IRB. If you can't afford to make full payment, then you are required to liaise with IRB to work out a reasonable payment plan. For those who fail to do either one of the two mentioned, then IRB will do the job for you, via clause CP38 which is forced deduction, on top of your existing Potongan Cukai Berjadual (PCB) or Scheduled Tax Deduction. Serve me right actually. Had I worked out a payment plan with IRB earlier, I could have reduced the CP38 deduction, though it would take me longer to pay it off.

My income tax is definitely more than RM1,684.44 actually. Thank God for PCB. If not for PCB, I think I'd still be paying the Government from my grave. That is the beauty of PCB - the Government forces you to deduct a reasonable amount from your monthly salary (based on a certain formula) which goes to your IRB account. When it's time to file your taxes, you already have a significant amount to cover your taxes. If you're lucky, you will even get a rebate from the Government in an event that your deductions are in excess of the required tax payable (cukai terlebih bayar).

But that is not the case for me. I haven't enjoyed a rebate for quite some years now. It is now always "cukai tak cukup bayar" which means even my PCB cannot cover the taxes. Hence for the last assessment year, I still owed the Government RM1,684.44 and it will take me 7 months to clear this one. So be it. At least I pay taxes unlike some big time tax evaders. I have an option actually which is to instruct my employer to increase the PCB deduction. But do I really want to do that? Even the current PCB deduction is killing me.

Thank God that I'm married and have kids which enables me to enjoy huge tax exemptions or discounts. Imagine those who earn the same amount of salary like me but are single. They pay higher taxes. So hey, I can't really complain.

Anyway, I guess prudent spending is the way to go these days. If it's unnecessary, don't spend. Refrain from splurging. Strecth your finances.

This is reality. And it bites...