Rental income tax in Malaysia: is rental income taxable, what can you deduct, and what does a RM2,000-a-month condo actually net after LHDN?
Rental income is taxable in Malaysia. For a tax-resident individual letting a property passively, rent is income under section 4(d) of the Income Tax Act 1967: you take gross rent, subtract the expenses of earning it (loan interest, quit rent or parcel rent, assessment, maintenance charges and sinking fund, fire insurance, repairs, agent fees for renewals) and add the net figure to your salary and other income. The total is taxed on the resident scale of 0% to 30%: the slice from RM50,001 to RM70,000 is taxed at 11%, RM70,001 to RM100,000 at 19% and RM100,001 to RM400,000 at 25% (LHDN scale for YA 2025, filed in 2026). There is no residential rental exemption in force in 2026; a RM2,000-a-month condo is taxed on whatever is left after costs.
Two things catch landlords out: expenses incurred before the first tenant (advertising, first agent commission, first tenancy agreement) and any renovation are not deductible, and a rental loss under section 4(d) cannot be carried forward. The worked example below shows the after-tax yield.
How is rental income taxed for a Malaysian tax resident?
At your marginal rate, on the net figure. Net rental income is aggregated with employment and other income; there is no separate flat rate for residents (non-residents pay a flat 30%, covered in rental income tax for foreign landlords). The resident scale for YA 2025, as published in RinggitPlus's 2026 tax guide:
| Chargeable income (RM) | Rate on that slice |
|---|---|
| 0 to 5,000 | 0% |
| 5,001 to 20,000 | 1% |
| 20,001 to 35,000 | 3% |
| 35,001 to 50,000 | 6% |
| 50,001 to 70,000 | 11% |
| 70,001 to 100,000 | 19% |
| 100,001 to 400,000 | 25% |
| 400,001 to 600,000 | 26% |
| 600,001 to 2,000,000 | 28% |
| above 2,000,000 | 30% |
So the same RM10,000 of net rent costs a RM60,000 earner RM1,100 in tax and a RM150,000 earner RM2,500. When a couple owns the unit jointly, each declares their share, which is one practical reason to put a rental unit in the lower earner's name (or joint names) from the start.
Passive (section 4(d)) versus business (section 4(a)): LHDN's Public Ruling 12/2018 treats letting as a business source only if you provide comprehensive, active maintenance or support services (think serviced residences or short-stay operations with cleaning and reception). Ordinary landlords are 4(d). The difference matters: a 4(a) landlord can claim capital allowances on furniture and carry losses forward; a 4(d) landlord cannot do either.
What expenses can a landlord deduct, and what is not allowed?
Deductible: anything spent wholly to earn the rent from an existing tenancy. Per Public Ruling 12/2018 as summarised by tax firms YYC and ANC Group:
| Deductible against rent | Not deductible |
|---|---|
| Housing loan interest (not the principal) | Loan principal repayments |
| Quit rent / parcel rent and assessment tax (see quit rent and assessment explained) | Stamp duty and legal fees on the purchase |
| Maintenance charges, sinking fund, sewerage (Indah Water) | Renovation, built-ins, extensions: capital improvements |
| Fire insurance / houseowner policy premium | Advertising and agent commission to find the first tenant |
| Repairs and like-for-like replacements (repaint, fix leaks, replace a broken heater) | Legal fees and stamp duty on the first tenancy agreement |
| Agent commission, legal fees and stamp duty on renewals and replacement tenants | Expenses while the unit sat empty before it was ever let |
| Rent collection or property management fees | Your own time, travel to inspect, mobile bills |
The line LHDN draws is repair versus improvement: replacing a broken water heater with an equivalent one is a repair; upgrading the kitchen or adding a built-in wardrobe that was not there is capital and comes out of your after-tax pocket. Keep the two on separate invoices.
Losses: if deductible expenses exceed rent in a year (common in year one, when interest is highest), the 4(d) loss is simply lost. It does not offset your salary and does not roll into next year.
What does a RM2,000-a-month condo net after tax?
Take a RM500,000 condo rented at RM2,000 a month: gross rent RM24,000 a year, a 4.8% gross yield. The running costs below use figures already on this site or published examples; the interest and insurance lines are assumptions you should replace with your own bank and insurer statements.
| Line | Owner with a 90% loan | Owner with no loan |
|---|---|---|
| Gross rent | RM24,000 | RM24,000 |
| Loan interest (assume RM15,000 in year one) | (RM15,000) | 0 |
| Maintenance + sinking fund (900 sq ft at RM0.33 psf, per our maintenance fee guide) | (RM3,924) | (RM3,924) |
| Assessment (DBKL FAQ example: RM528 a year) + parcel rent (assume RM100) | (RM628) | (RM628) |
| Fire insurance and repairs (assume RM1,300) | (RM1,300) | (RM1,300) |
| Net rental income (taxable) | RM3,148 | RM18,148 |
| Tax if your top slice is the 19% band | RM598 | RM3,448 |
| Tax if your top slice is the 25% band | RM787 | RM4,537 |
| Net-of-costs yield before tax | 0.6% | 3.6% |
| Net yield after tax (25% band) | 0.5% | 2.7% |
Two lessons. First, a geared landlord pays very little income tax on rent because interest eats the profit; the tax bill only bites once the loan is largely repaid. Second, the after-tax yield on a paid-up Klang Valley condo at 4.8% gross is under 3% net, before vacancy. How to compare that honestly against a fixed deposit or EPF is in rental yield explained.
How do you declare rental income to LHDN?
- Pick the form. Passive 4(d) rent goes into the rental income section of Form BE (individuals with no business income), due 30 April for the previous year, or 15 May via e-Filing. If you also have business income, or LHDN treats your letting as a business source, it goes on Form B, due 30 June (15 July e-Filing). Deadlines per RinggitPlus's 2026 tax guide.
- Compute net rent per property, then total. Gross rent received in the year, less the deductible list above. Deposits are not income until forfeited.
- Declare even if the net is zero or negative. A loss is not carried forward, but an undeclared source is what triggers penalties, not a loss.
- Keep records for seven years: stamped tenancy agreement, bank statements showing rent received, the bank's annual interest statement, JMB and council receipts, insurance and repair invoices. LHDN's standard retention period is seven years from the end of the year of assessment.
Two side notes. Residential rent is not subject to service tax (residential property is exempt under Group K of the Service Tax Regulations 2018), so you do not add SST to a home tenancy; commercial-title landlords should check separately. And the tenancy agreement itself must be stamped within 30 days; an unstamped agreement is a weak document in court and a red flag in an audit.
Frequently asked questions
Is rental income taxable in Malaysia if I only rent out one room?
Yes. There is no minimum threshold and no residential exemption in 2026. Rent from a single room is section 4(d) income; you deduct a fair share of the running costs and declare the net in Form BE.
Can I deduct my full monthly instalment?
No. Only the interest portion is deductible; the principal is you buying the asset, not a cost of earning rent. Your bank's annual loan statement splits the two.
Is renovation before the first tenant deductible?
No. Renovation is capital expenditure, and anything spent before the property is first let (agent fee, advertising, first tenancy agreement) is an initial expense that Public Ruling 12/2018 excludes. Repairs during an existing tenancy are deductible.
What if my expenses are higher than my rent?
Under section 4(d) the loss is lost: it does not reduce your salary tax and cannot be carried to the following year. Only business-source (4(a)) landlords can carry losses forward.
Does Airbnb count as passive rental?
Usually not. Short stays with cleaning, linen and check-in services look like the active support services that Public Ruling 12/2018 uses to classify letting as a business source, which changes the form (B), the deductions and the loss rules. See Airbnb and short-term rental condos.
General information based on the Income Tax Act 1967, LHDN Public Ruling 12/2018 and the YA 2025 resident scale as published in 2026 tax guides, fetched in September 2026. It is not tax advice; the interest and insurance figures in the example are assumptions, not data. For your own return, a licensed tax agent or LHDN's branch counter is the authority.