The RM10,000 tax deduction for interest on housing loans will only be applicable for one property which is not being rented out.

The incentive, which was announced in the so-called “mini budget” on Tuesday, applies to Malaysian citizens who will live in that house, flat, apartment or condominium.

Inland Revenue Board (IRB) chief executive officer Datuk Hasmah Abdullah said the sales and purchase agreement for the house had to be executed between March 10 2009 and Dec 31 2010.

“The tax deduction is given for three consecutive years from the first year the housing loan interest is paid, and is effective from the year of assessment 2009.

“Also, if there are two or more individuals who are eligible for the tax deduction on the house, each individual is allowed a deduction which is proportionate to the interest they had paid,” she told a press conference Wednesday.

Hasmah said this deduction however would not exceed RM10,000 in total.

She also elaborated on the other tax incentives that were announced and said retrenched workers would now benefit from a higher tax exemption on the monies they received from voluntary or mutual separation schemes.

“Such workers are now eligible for a RM10,000 exemption per year of service as compared with RM6,000 before and this takes effect from July 1 last year.”

She added that those who were retrenched from July 1 last year and had received the RM6,000 exemption could file an appeal at the IRB to get the RM10,000 exemption.

Hasmah said banks have also agreed to observe a moratorium on housing loans belonging to retrenched workers from March 10 2009 to March 9 2010.

“This means banks would not have to pay tax on the interest accrued for the 12 months whereas the individual who takes the loan must be a citizen and would have to be retrenched from July 1 last year.”

Hasmah said businesses also stood to benefit from the introduction of carrying back losses, renovation allowances and accelerated capital allowances for machinery.

For the carrying back of losses of up to RM100,000, Hasmah said it would apply for the year of assessment 2009 and 2010 and all businesses would be eligible including sole proprietors and partnerships.

As for the renovation allowance, it is limited to RM100,000 from March 10 this year till Dec 31 2010. There are 16 categories of renovations eligible for the allowance but consultation fees, fine art or antique items are not eligible.

Hasmah said accelerated capital allowances for machinery could now be claimed within two years instead of four.