legal finance

Rental Income Tax Malaysia 2026: How to Declare and Calculate

Property Matching AI Editorial Team2026-03-152 Sources
Rental income in Malaysia is taxable under Section 4(d) (passive) or 4(a) (business). Progressive rates 0-30% for residents; 30% flat for non-residents. Allowable deductions include mortgage interest, maintenance fees, quit rent, assessment, repairs and insurance. Declare in annual income tax return (Borang BE/B). E-invoicing required from July 2026 for landlords with turnover above RM 1M.

Rental Income Tax Malaysia 2026

1. Legal Classification

Section 4(d) - Passive rental income (most landlords):

  • Cannot carry forward losses
  • Basic allowable deductions apply

Section 4(a) - Business rental income (active services: cleaning, security, F&B provided):

  • Can carry forward losses
  • More complex; consult tax advisor

2. Tax Rates for Rental Income

| Taxpayer Category | Tax Rate | |---|---| | Malaysian residents (progressive) | 0-30% | | Non-residents | 30% flat |

Residential: Rental income added to total chargeable income, taxed at personal income tax rates.

3. Allowable Deductions (Section 4(d))

The following costs are deductible against rental income: ✅ Mortgage interest (not principal repayment — interest only) ✅ Maintenance fees and sinking fund ✅ Quit rent and assessment tax ✅ Fire and public liability insurance ✅ Repairs and maintenance (not capital improvements) ✅ Management fees (if professional property manager used) ⚠️ NOT deductible: Capital expenditure (renovation), depreciation, principal loan repayment

4. Calculation Example

Annual rental income: RM 36,000 (RM 3,000/month) Less allowable deductions:

  • Mortgage interest: RM 14,400
  • Maintenance fees: RM 3,600
  • Assessment + quit rent: RM 1,200
  • Insurance: RM 600
  • Total deductions: RM 19,800
  • Net rental income: RM 16,200 Added to salary income and taxed at applicable personal rate.

5. How to Declare

  • Salaried employees: Declare in Borang BE (e-Filing at MyTax portal)
  • Business owners: Declare in Borang B
  • Deadline: April 30 (BE) or June 30 (B) of following year
  • Penalty for non-declaration: RM 200-20,000 fine + tax + penalty under Section 113 ITA

6. New 2026 Requirements

  • E-invoicing (MyInvois): From July 2026, landlords with turnover >RM 1M must issue e-invoices for rent receipts
  • SST on certain rentals: From July 2025, some commercial rental services attract Service Tax

Key Takeaways

  • Declare rental income in annual tax return (Borang BE or B via MyTax e-Filing)
  • Key deductible: mortgage interest (not principal), maintenance fees, assessment, insurance, repairs
  • Non-declaration penalty: fine + back tax + 10% penalty
  • Non-residents: 30% flat tax on gross rental (no deductions)
  • E-invoicing from July 2026 for large landlords (RM 1M+ annual turnover)

Frequently Asked Questions

Do I need to pay income tax on rental income in Malaysia?

Yes. All rental income is taxable in Malaysia under the Income Tax Act 1967. Residents pay progressive rates (0-30%) on net rental income (after allowable deductions). Non-residents pay 30% flat on gross rental income. Declare in your annual income tax return (Borang BE for salaried employees) via LHDN MyTax e-Filing portal.

What can I deduct from rental income for tax in Malaysia?

Allowable deductions: mortgage interest (not principal), maintenance fees, sinking fund, quit rent, assessment tax, fire insurance, repairs and maintenance costs (not capital improvements), management fees. You CANNOT deduct: capital expenditure, loan principal repayment, depreciation. Keep all receipts as LHDN may audit.

What is the tax rate on rental income in Malaysia for foreigners?

Non-residents (foreigners) pay a flat 30% income tax on gross rental income from Malaysian properties, with no allowable deductions available. This significantly reduces after-tax returns for foreign investors. Malaysian residents pay progressive rates (0-30%) on net rental income after deductions, typically 13-26% for most investors.

Sources & References

  1. [1] Inland Revenue Board Malaysia (LHDN) — Rental income taxable under ITA 1967 Section 4(d); residents progressive 0-30%; non-residents flat 30%; Borang BE/B declarationhttps://www.hasil.gov.my
  2. [2] YYC TaxPOD / Bar Council Malaysia — E-invoicing (MyInvois) required from July 2026 for landlords with turnover >RM 1M; SST on certain rental services from July 2025https://www.yyctax.com
Malaysia

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