I got this off the an email that I received that further confirmed my decision to stick to 11% instead of reducing my EPF contribution to 8%. For some, the 3% might seem like alot of money at first but after seeing the below calculation, perhaps it would be a good idea to reconsider and fill up the form to keep the contribution at 11%?
Assume monthly basic salary is RM4000 for easier calculation.
- If your monthly EPF contribution is 11% ( RM440 ), taxable income = RM3560, income tax payable per month= RM77.
- If your monthly EPF contribution is 8% ( RM320 ), taxable income = RM3680, income tax payable per month = RM109.
So, 11% to 8% means that you get extra RM120 on your gross income, but after deducting the income tax payable per month of RM109, you are actually only getting RM11 extra monthly. In today high priced market, what do you get for RM11? A lunch meal at the economy rice corner for one and a drink perhaps. The reduction in EPF contribution is suppose to boost up the slow-down market, but from this example we see that the money does not go into the market. Instead the money goes direct into the government's pocket through the greater amount of income tax that we will have to pay. Obviously this measure does not help the market at all. So, please tell me again what is the purpose of the VOLUNTARY reduction?