Rental income is taxable in Malaysia. Here is what LHDN requires you to declare, what you can deduct, and how to file — without overpaying or under-declaring.
This guide is for general information only. Tax rules are subject to change. Consult a qualified tax professional for advice specific to your situation. Primary authority: LHDN (Inland Revenue Board of Malaysia), hasil.gov.my.
Yes. Rental income received by Malaysian residents is taxable under the Income Tax Act 1967 (ITA) and must be declared in your annual tax return to LHDN. There is no minimum rental income below which declaration is excused — all rental income (after allowable deductions) is subject to assessment.
Rental income is assessed on a receipt basis — you declare rent in the year of assessment in which it was received, not when it was due. Advance rent received (e.g. 3 months upfront at signing) is assessed in the year received, not spread over the tenancy period.
For non-resident individuals, rental income is taxed at a flat rate of 30% on gross rental income, with no deductions available.
Under LHDN Public Ruling No. 12/2018 (Income from Letting of Real Property), how your rental income is taxed depends on the nature of services you provide alongside the tenancy:
| Classification | ITA Section | Trigger condition | Tax treatment |
|---|---|---|---|
| Business income | Section 4(a) | You comprehensively and actively provide maintenance or support services (e.g. cleaning, security, food service, repairs to structural and exterior elements) | Taxed as business income; capital allowances available; more complex filing |
| Non-business (passive) income | Section 4(d) | You simply collect rent; no comprehensive services provided | Taxed as passive income; allowable deductions (see below); simpler filing |
The vast majority of individual residential landlords in Malaysia fall under Section 4(d) — passive rental income. This guide focuses on the Section 4(d) treatment applicable to most landlords.
An exception: if you rent out rooms in your own home and also provide meals, laundry, or cleaning to tenants (effectively running a boarding house), LHDN may reclassify this as Section 4(a) business income.
All payments from the tenant that constitute consideration for the right to occupy the property are taxable gross income. This includes:
Security deposits and utility deposits are not income when received — they are liabilities (monies held for the tenant). If a deposit is forfeited (e.g. the tenant abandons the property and the landlord retains the deposit), the forfeited amount becomes taxable income in that year of assessment.
Under Public Ruling No. 12/2018, the following expenses incurred wholly and exclusively in the production of rental income are deductible:
| Deductible expense | Examples | Conditions |
|---|---|---|
| Loan interest | Interest portion of mortgage / property loan repayment | Interest only — principal repayment is NOT deductible |
| Assessment tax (Cukai Taksiran) | Cukai Pintu paid to local council (DBKL, MBPJ, MPAJ etc.) | Only for period property was tenanted |
| Quit rent (Cukai Tanah) | Annual land tax paid to state land office | Fully deductible |
| Fire insurance / landlord insurance | Building fire insurance premium | Property must be rented or held for rental |
| Maintenance and repairs | Plumbing repairs, repainting, replacing worn-out flooring like-for-like, fixing aircon | Must be repairs to maintain existing condition; NOT improvements (see below) |
| Management / agent fees | Commission to BOVAEP-registered agent for finding tenant; property management fees | Must be incurred in connection with the rental |
| Service charges / maintenance fees / sinking fund | Strata management fees, sinking fund contributions | For strata properties; applicable to tenanted period |
| Indah Water (IWK) charges | Sewerage charges paid by landlord | Deductible if borne by landlord |
| Renewal / re-letting expenses | Legal fees for tenancy renewal; advertising costs | Directly related to tenancy |
LHDN draws a sharp distinction between repairs (restoring to existing condition — deductible) and improvements (enhancing above original condition — not deductible). This distinction is critically important and the most common source of errors in landlord tax filings:
| Scenario | Deductible? | Reason |
|---|---|---|
| Replacing a broken water heater with same spec | Yes — repair/replacement | Restoring to existing condition |
| Upgrading an old water heater to a premium model | No — improvement | Enhancing above original |
| Repainting walls (like-for-like) | Yes — maintenance | Keeping existing condition |
| Adding a feature wall that did not exist before | No — improvement | New addition |
| Fixing a leaking pipe | Yes — repair | Restoring to working condition |
| Re-piping the entire unit proactively | Partial — grey area; consult tax advisor | May be partly repair, partly improvement |
| Interest on mortgage | Yes | Allowed under PR 12/2018 |
| Mortgage principal repayment | No | Capital repayment, not expense |
| Assessment tax (Cukai Taksiran) | Yes | Outgoing for the property |
| RPGT on sale of property | No | Separate tax, not a rental expense |
Net rental income (gross rent minus allowable deductions) is added to your other income and assessed at Malaysia’s progressive personal income tax rates. For Year of Assessment 2025, the applicable rates are:
| Chargeable income (RM) | Tax rate | Tax on this band |
|---|---|---|
| 0 – 5,000 | 0% | Nil |
| 5,001 – 20,000 | 1% | RM150 |
| 20,001 – 35,000 | 3% | RM450 |
| 35,001 – 50,000 | 8% | RM1,200 |
| 50,001 – 70,000 | 13% | RM2,600 |
| 70,001 – 100,000 | 21% | RM6,300 |
| 100,001 – 400,000 | 24% | RM72,000 |
| 400,001 – 600,000 | 24.5% | RM49,000 |
| 600,001 – 2,000,000 | 25% | RM350,000 |
| Over 2,000,000 | 30% | — |
Your effective tax rate on rental income depends on your total chargeable income from all sources combined, not just rent. A landlord earning RM80,000 total chargeable income will have their top-band rental income taxed at 21%.
To make these rules concrete, here is an illustrative calculation for a landlord who owns one condominium unit rented out for the full year:
| Item | Annual amount (RM) | Notes |
|---|---|---|
| Gross rental income (RM2,200/month) | 26,400 | 12 months × RM2,200 |
| Less: Loan interest | (8,400) | Interest portion of monthly instalment |
| Less: Assessment tax (Cukai Taksiran) | (600) | Semi-annual payment to MBPJ |
| Less: Quit rent | (80) | Annual Cukai Tanah |
| Less: Fire insurance premium | (350) | Building coverage |
| Less: Service charge / maintenance fee | (2,400) | RM200/month strata fee |
| Less: Repairs (aircon service, minor plumbing fix) | (800) | Documented receipts |
| Less: Agent re-letting fee | (2,200) | 1 month commission on new tenancy |
| Net taxable rental income | 11,570 |
If this landlord’s total chargeable income from employment + rental = RM80,000, the RM11,570 net rental income sits in the 21% band, resulting in approximately RM2,430 in additional tax. The effective rental tax paid is about 9.2% of gross rent in this scenario — far lower than the headline 21% rate suggests, because of allowable deductions.
Rental income is reported in your annual income tax return. For residents without business income, this is Form BE:
Rental income is entered in the Statutory Income section under “Rental/Letting of Real Property.” You report gross income and deductible expenses, with net income carried forward to the main assessment. Form HK-4D (Particulars of Properties & Total Rental) is an attachment that lists all rental properties.
If your rental income is classified as business income under Section 4(a), you file Form B instead, which has a 30 June e-Filing deadline.
LHDN requires records to be kept for a minimum of 7 years. For each rental property, maintain:
LHDN can audit tax returns and request evidence for any deductions claimed. Without receipts, deductions can be disallowed and the full gross rental income becomes the assessed amount, potentially with penalties and interest.
If you own more than one rental property, the income and expenses for each property are assessed separately. A loss from one property (i.e. allowable expenses exceed rent) cannot be used to offset a profit from another property under Section 4(d). However, losses can be carried forward to be set off against future income from the same property.
If you actively manage multiple properties with comprehensive services, LHDN may reclassify your income to Section 4(a) business income — consult a tax advisor if you manage more than a few units.
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