Empirical Study on the Benefits of Tax Incentive for Islamic Home Financing in Malaysia

In the assessment years 2009-2010, Malaysia's Income Tax Act 1967 had allowed deductions for interest paid on individuals' housing loans up to RM10,000 for 3 years of assessment. Majority taxpayers with annual income of less than RM100,000 had benefited from this exemption but unfortunately the tax relief was later repealed. Hence, this study employed quantitative (questionnaire survey) and qualitative component (interviews) to gain insight on the demographic profile of individual taxpayers and their perceptions on the benefits of tax incentives for Islamic home financing if granted again in Malaysia. Both qualitative and quantitative findings have proven that any reconsideration of similar tax incentives would be beneficial to several stakeholders including homeowners, home developers, Malaysian government and Islamic Finance industry at large and the Malaysian economy as a whole.