Do You Need to Declare Rental Income?
Yes. All rental income received by Malaysian residents is taxable under Section 4(d) of the Income Tax Act 1967. There is no minimum threshold. Even if you only have one room rented out, the income must be declared in your annual tax return.
LHDN has access to property ownership records and stamp duty data. Undeclared rental income is one of the most common sources of tax audit triggers in Malaysia.
What Can You Deduct?
The good news is that several expenses are deductible against rental income, reducing your taxable amount significantly.
Allowable deductions include: assessment tax, quit rent, fire insurance premiums, repair and maintenance costs (not improvements), property management fees, and loan interest on the property (not principal repayment).
Not deductible: renovation and improvement costs, furniture purchases, depreciation, or capital expenditure of any kind. These are capital in nature and cannot be offset against rental income.
How Rental Income Is Taxed
Your net rental income (after allowable deductions) is added to your other income and taxed at Malaysia's progressive income tax rates. If your total chargeable income is below RM35,000, your rental income effectively attracts very little tax. At higher income levels, rates can reach 24% or more.
Filing Deadline and Process
The deadline for filing your annual tax return is April 30 for salaried individuals without a business. File via e-Filing at MyTax (mytax.hasil.gov.my). Rental income is declared under Part E of the BE form.
Common Mistakes to Avoid
- Declaring gross rental income without deducting allowable expenses
- Claiming renovation costs as repairs (these are capital, not deductible)
- Not keeping receipts for all deductible expenses
- Not declaring rental income from a family member's property you manage
- Missing the April 30 deadline, which triggers a 10% penalty