s 4(c) Interest Income

Interest income as a business income (s 4B)

With effect from YA 2013, interest income will only be assessed as business income if:

a. interest is derived from a source which form part of the stock in trade of a business of a person

b. interest is receivable by a person from the business of lending money and that business is licensed under any written law. This applies to banking, insurance or money lending companies.

Derivation of interestincome

Any person receiving interest income will be subject to tax in Malaysia if:

a. the interest income is derived from Malaysia

b. the interest income is received in Malaysia from outside Malaysia (applies only to specialised industries companies)

Sectino 27(1)

Gross income consists of any interest when it first becomes receivable in the relevant period shall be treated as gross income of the relevant person for the relevant period when it has been received.

Section 27(2)

Where the gross interest income receivable overlaps two or more basis periods, then the interest will be apportioned to the relevant period and it is deemed accrued evenly.

It should be noted that the s 27(2) covers interest income that relates to past period. When the interest income is received, it will then be spread back to the past years on a time basis.

Section 27(3)

Section 27(3) deals with interest received in advance. Where interest is an investment income and received in advance for more than a basis period, the interest income would not be apportioned but instead be treated as gross income of the period in which it is received.

Exemption

Paragraph 35 of Sch 6 exempts interest or discount paid or credited to any individual, unit trust and listed closed-end fund:

a. in respect of securities or bonds issued or guaranteed by the Government

b. in repect of debentures or Islamic Securities other than convertible loan stock, approved by the Securities Commission

c. in respect of Bon Simpanan Malaysia issued by the Cebtral Bank of Malaysia.

Income Tax (Exemption) - Individual

a. a bank or a finance company licensed or deemed to be licensed under the Banking and Financial Institutions Act 1989

b. a bank licensed under the Islamic Banking Act 1983

c. a development financialinstitution prescribed under the Development Financial Institutions Act 2002

d. the lembaga Tabung haji established under the Tabung Haji Act 1995

e. the Malaysia Building Society Berhad incorporated under the Companies Act 1965

f. a co-operative society registered under the co-operative Societies Act 1993

g. the Borneo Housing Finance Berhad incorporated under the Companies Act 1965