What is tax deduction?

Tax deduction, or commonly known as 'deduction,' refers to expenses that are legally designated to allow individuals to subtract them from their income, thereby reducing taxable income. This method, after deducting expenses, enables individuals to potentially increase their tax refunds. Importantly, this is not tax evasion but rather a legal provision that allows everyone to do so.

The method to calculate net income is '(Total annual income - Expenses) - Deductions = Net income.

The more deductions you have, the less tax you will pay, as it reduces your net income.

The basic deductions used for tax deductions in 2023 are as follows.

The list of tax deductions specified by law may vary slightly each year depending on the government's policies to support and encourage increased investment behavior. Therefore, each year one must check which tax deductions are applicable and update them accordingly for the year 2023.

Personal and Family Tax Deductions

1.Personal deductions

Deductions up to 60,000 baht are available as a basic right for individuals with any income, which can be deducted immediately.

2.Marriage allowance deduction

Deduction of 60,000 Baht can be claimed, provided that the spouse has no income and is legally registered. If the spouse has income, it must be considered whether to file taxes jointly or separately.

3.Child allowance

1.Children eligible under income tax laws must be under 20 years old or aged 21-25 and pursuing a bachelor's degree (or equivalent)

• For children born before the year 2018, a deduction of 30,000 baht per child is allowed.
• For children born after the year 2018, the first child qualifies for a deduction of 30,000 baht, and subsequent children qualify for a deduction of 60,000 baht each.
• The deduction can be claimed for the actual number of children.
• Children claimed for deduction must have an income of less than 30,000 baht per year.

2.Adopted children must be registered as legally adopted according to the law

•  The deduction for each child is up to 30,000 baht, with a maximum of 3 children.
•   If there are legally adopted children, their rights must be utilized and counted first. If the rights for 3 biological children are fully utilized, the rights for legally adopted children cannot be used.
• Legally adopted children used for tax deduction must have an income of less than 30,000 baht per year.

3.Deductions for pregnancy and childbirth expenses can be claimed based on actual payments made to government or private hospitals, up to a maximum of 60,000 baht per pregnancy. In the case of twins, it will be counted as one pregnancy.

 1.Deduction for expenses in supporting parents

1. Deduction for supporting parents can be claimed up to 30,000 baht per person.
2. It can be claimed for oneself and one's spouse, with a maximum of 4 persons in total.
3. The parents being claimed for must be over 60 years old and have an income not exceeding 30,000 baht.
4. In cases where there are multiple children in the family, siblings can only claim the deduction for supporting parents for one person, and the same parents cannot be claimed by multiple siblings.
5. For foster children, the deduction for supporting parents cannot be claimed.

2.Deduction for supporting disabled persons or persons with disabilities

1. Deduction of up to 60,000 baht per person.
2. Disabled persons must have an income not exceeding 30,000 baht per year, possess a disability card, and have a certification of being dependent on the taxpayer.
3. In cases where the disabled person or person with disabilities is a parent, spouse, or child of the taxpayer, both parties can claim the deduction, and there is no limit on the number of eligible persons. For example, if the taxpayer is supporting a disabled parent, they can claim a deduction of 30,000 baht, and if the parent is also disabled, an additional deduction of 60,000 baht can be claimed, resulting in a total deduction of 90,000 baht. Similarly, if the disabled person is the spouse, the deduction can go up to 120,000 baht.
4. In cases where the disabled person or person with disabilities is not a parent, spouse, or child of the taxpayer, only one person can claim the deduction.

10 Tax Deductions from Insurance, Savings, and Investments

1.Voluntary Provident Fund Contributions

Deductions can be made based on the actual amount paid, up to a maximum of 9,000 Baht. This is the amount that must be deducted into the fund, which is 5% of the monthly salary, with a minimum of 83 Baht per month and a maximum of 750 Baht per month (the maximum amount is calculated based on a salary base of 15,000 Baht).

2.Life Insurance Premiums and Investment-linked Insurance Premiums

• Deductible life insurance premiums are equivalent to the actual premiums paid, but not exceeding 100,000 Baht.
• The policy must have a coverage period of at least 10 years. The policy must be issued by insurance companies operating in Thailand only.
• If your spouse has no income, you can additionally deduct your spouse's insurance premiums, up to a maximum of 10,000 Baht.
• If you have not yet taken out life insurance and are looking for a policy that suits you.

3.Health Insurance Premiums and Personal Accident Insurance Premiums

• Deductible premiums are based on the actual amount paid, but must not exceed 25,000 Baht. However, when combining premiums for health insurance, life insurance, and investment-linked insurance, the maximum deduction is capped at 100,000 Baht.

4.Retirement Life Insurance Premiums

• Deductible premiums are 15% of the actual income, but not exceeding 200,000 Baht.
• The insurance policy must have a coverage period of at least 10 years and be obtained from an insurance company operating in Thailand.
• It must have regular benefit payouts and specify the age range for payouts, typically between 55 and 85 years old.

5.Parent Health Insurance Premiums

Premiums paid for health insurance for parents can be deducted up to the actual amount paid, but when combined for both parents, it must not exceed 15,000 Baht. The parents must have an income not exceeding 30,000 Baht per year. There is no age requirement for the parents to be eligible for this deduction.

6.Contributions to the Provident Fund (PVD), Government Pension Fund (GPF), or Private School Teacher Welfare Fund

Contributions to the Provident Fund (PVD), Government Pension Fund (GPF), or Private School Teacher Welfare Fund can be deducted up to 15% of the actual income paid, provided that it does not exceed 500,000 Baht.

7.National Savings Fund (NSF)

Contributions to the National Savings Fund (NSF) can be deducted up to the actual amount paid, but not exceeding 30,000 Baht. Additionally, there are additional conditions if you are interested in investing in the NSF.

• Must be a Thai citizen aged 15-60 years old.
• Not covered by the social security system, except for those covered under Section 40 (1).
• Not a civil servant or member of the Government Pension Fund (GPF), and not a regular employee.
• Simply put, it is a fund for self-employed individuals who do not have employers.

8.Investment in Retirement Mutual Funds (RMF).

Money invested in RMF (Retirement Mutual Fund) can be deducted for tax reduction based on the actual investment amount. The deduction can be up to 30% of the income, with a maximum of 500,000 Baht.

9.Investment in Super Saving Funds (SSF)

Money invested in SSF (Super Saving Funds) can be deducted for tax reduction based on the actual investment amount. The deduction can be up to 30% of the income, with a maximum of 200,000 Baht. Currently, the tax reduction is available for 5 years, which are the years 2020-2024.

 10.Investment in Social Enterprises

Deductions can be made based on the actual investment, up to a maximum of 100,000 Baht. This investment must be made in businesses or shares registered as social enterprises under the conditions specified in the Promotion of Social Enterprise Act B.E. 2562. If it involves investing in shares, there is a requirement to hold the shares until the respective social enterprise ceases its operations.

Don't forget!!! : Calculate the maximum rate for deductions to maximize investment value and tax savings

1. Life insurance + Savings insurance + Health insurance + Specific health accident insurance = 100,000 baht
2. Retirement life insurance + Retirement fund* = 500,000 baht

*The retirement funds currently available include the Provident Fund (PVD), Government Pension Fund (GPF), Teachers' Aid Fund for Private Schools, National Savings Fund (NSF), Retirement Mutual Fund (RMF), and Super Saving Funds (SSF).

1.Deducting Tax with Donations

General Donations Donations are tax deductible up to the actual amount paid, but not exceeding 10% of the income after deductions for expenses and tax allowances.

2.Donations are tax deductible at double the amount but not exceeding 10% of the income after deductions for expenses and tax allowances. That is,

• Educational institutions, both public and private.
• State hospitals.
• Donations through e-Donation via the Parliament, the Justice Fund, sports organizations affiliated with the Sports Association of Thailand, funds for the development of science and technology, research funding in accordance with the law, funds for metrology development, funds for public health system development, teacher and educational personnel development funds under the Ministry of Education, local administrative organizations for early childhood development, procurement of books or electronic media to promote reading in government schools or organizations, private schools, or educational institutions, vocational training projects, rehabilitation centers, and recovery for children, and donations for people with disabilities to access public facilities.

 3.Donations to political parties

Can be deducted up to the actual amount paid, with a maximum of 10,000 baht. However, the conditions for tax deduction through donations must be regularly updated by the government, as there may be new organizations added and revised donation acceptance criteria.

Additional tax deductions through government stimulus measures to boost the economy

       1.Mortgage Interest

Mortgage interest paid for the purchase or construction of a primary residence can be deducted for tax purposes, up to the actual amount paid and a maximum of 100,000 Baht.

       2.Good Shop, Good Return" for Tax Deduction in 2023

Purchases of goods or services made between January 1, 2023, and February 15, 2023, can be deducted for tax purposes up to the actual amount paid, with a maximum of 40,000 Baht. The first 30,000 Baht must be supported by a full tax invoice, both in paper and electronic formats through the e-Tax Invoice & e-Receipt system of the Revenue Department. The remaining 10,000 Baht must be supported by a full tax invoice, specifically in electronic format only. Taxpayers are required to retain both paper and electronic tax invoices as evidence. In case the ink on paper invoices fades or is lost, it is recommended to scan the document or keep another copy as a backup.

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Source: https://www.krungsri.com/th/krungsri-the-coach/taxes/tax-knowledge/maximize-tax-deduction