To calculate income tax from a supplied table, find the chargeable income, then tax each band of it at that band’s rate and add the results.
This lesson belongs to SPM Mathematics taxation. It assumes you can already read the table, as covered in reading tax bands in a supplied table. All figures below are invented for practice and are not real tax rates.
A fictional table
Here is the table used in this lesson. Real rates and amounts change, which is why exam questions supply their own.
| Chargeable income (RM) | Rate | Tax on this band (RM) | Tax on income up to the top of the band (RM) |
|---|---|---|---|
| First 10 000 | 0% | 0 | 0 |
| Next 20 000 | 4% | 800 | 800 |
| Next 20 000 | 9% | 1 800 | 2 600 |
| Above 50 000 | 15% |
Worked example: chargeable income RM42 000
Split RM42 000 into bands. The first RM10 000 is taxed at 0%, which gives RM0. The next RM20 000 is taxed at 4%, which gives RM800.
The remaining income is 42 000 − 30 000 = RM12 000, taxed at 9%: 12 000 × 0.09 = RM1 080. The total is 0 + 800 + 1 080 = RM1 880.
The running-total column gives a shortcut. Tax on the first RM30 000 is already RM800, so you only need 9% of the part above RM30 000: 800 + 1 080 = RM1 880.
The mistake that costs marks
The common slip is to use the rate of the band where the income lands for the whole amount. The student sees that RM42 000 falls in the 9% band and writes 42 000 × 9% = RM3 780.
That is RM1 900 too much. Only the RM12 000 above RM30 000 is taxed at 9%.
| Step | Wrong | Right |
|---|---|---|
| Method | 42 000 × 9% | Tax each band separately |
| Result | RM3 780 | RM1 880 |
| Sense check | Tax is 9% of income | Tax is about 4.5% of income |
A sense check catches this. The true tax, RM1 880, is a little under 4.5% of RM42 000, which is sensible when half the income sits in lower bands.
When the income reaches the top band
Suppose the chargeable income is RM65 000. The first RM50 000 gives RM2 600 from the running total. The remaining 65 000 − 50 000 = RM15 000 is taxed at 15%: 15 000 × 0.15 = RM2 250.
The tax is 2 600 + 2 250 = RM4 850. Using the running total avoids recalculating the lower bands.
Applying a tax rebate
A question may state a rebate, for example RM100, to be deducted from the tax itself. Work out the tax first, then subtract the rebate.
For RM42 000: 1 880 − 100 = RM1 780 payable. The next lesson on distinguishing taxable income and relief explains why a rebate and a relief are not the same.
Check yourself
Using the table above, calculate the tax on a chargeable income of RM36 000. Then state the tax if a rebate of RM50 is given.
Answer
Tax on the first RM30 000 is RM800. The remaining 36 000 − 30 000 = RM6 000 is taxed at 9%: 6 000 × 0.09 = RM540.
Tax = 800 + 540 = RM1 340. After the RM50 rebate, the tax payable is RM1 290.
What to study next
Practise choosing the right steps in the taxation mathematics practice set. If a question gives gross income, you must first find chargeable income, which is the focus of the next lesson.
If a teacher could help you set out these calculations cleanly, see online one-to-one Mathematics tuition.