14th September 2026 - 8 min read
Rent you earn from a property in Malaysia is taxable, and you declare it yourself in your annual tax return. You’re taxed on the profit, so once you take off costs like loan interest, insurance and repairs, the amount that gets taxed is often quite a bit smaller than the rent you collect.
All rental income from Malaysian property is taxable under the Income Tax Act 1967, whether you’re renting out a whole condo, a shop lot, a landed house, or one spare room in the home you live in.
Rental income also includes more than the monthly rent. If your tenant pays you anything extra for using the property, such as a separate monthly fee for the parking bay, that counts towards your rental income too.
And if a tenant pays a few years of rent upfront in one lump sum, the full amount is taxed in the year you receive it, not spread across the years it covers.
The one payment that isn’t counted as rental income is the security deposit, because that money still belongs to your tenant and you have to return it once the lease ends. It only becomes rental income if you keep some of it to cover unpaid rent or repair damages the tenant caused.
The first category is passive rental income, which is where nearly every individual landlord falls. LHDN calls it a non-business source under Section 4(d) of the Income Tax Act. Basically, all you do is rent out your property and collect the rent. The upkeep of shared facilities like the pool or gym has nothing to do with you, since the management office handles those.
The other category is business income under Section 4(a), which is for landlords who run their rental like a serviced residence. These landlords provide and manage the cleaning, maintenance and upkeep of the building themselves.
You’re taxed on your net rental income, which is the rent you collected minus the expenses LHDN allows. The test in Public Ruling No. 12/2018 is whether you spent the money directly on earning that rent, and in practice that covers the following.
| Expense | What it covers |
| Loan interest | Interest on the loan you took to buy the rented property |
| Assessment and quit rent | Cukai pintu paid to your local authority and cukai tanah paid to the land office |
| Fire insurance premium | The policy covering the rented property |
| Rent collection costs | Collection fees and legal costs to chase unpaid rent |
| Tenancy renewal costs | Costs to renew a tenancy or bring in a new tenant, including agent fees |
| Repairs | Ordinary repairs that keep the property in its existing state |
Your monthly loan instalment is split between interest and principal, and only the interest portion counts as a deductible expense. Your bank’s yearly loan statement shows how much interest you paid.
None of these expenses can be claimed for the time before your property was first rented out. If you bought the unit in January but found a tenant in May, only the portion of your assessment, quit rent and other bills from May onwards counts. After that first tenant, a gap before the next one doesn’t cost you the deduction, as long as you kept the place available to rent while it sat empty.
The money you spend finding your first tenant can’t be claimed. That covers advertising the unit, the legal fee for drawing up the first tenancy agreement, the stamp duty on it, and the agent’s commission. LHDN calls these initial expenses. Because you spend them to set the rental up before it earns anything, they can’t be claimed. The same costs can be claimed later on, when you renew a tenancy or bring in a replacement tenant, because by then the rental is already running.
Renovations need a closer look, because repairs and upgrades are treated differently. A repair restores the property to the condition it was already in, and you can claim it. An upgrade leaves the property better than before, which counts as capital spending, and that can’t be claimed against your rent. Repainting a unit after a tenant moves out is a repair, but ripping out a working kitchen for new cabinets is an upgrade.
Furnishing a unit for the first time is capital spending too, so the first sofa, fridge and set of curtains can’t be claimed, and passive landlords don’t get capital allowances to make up for it.
A couple of other things aren’t deductible. Your loan’s principal repayment doesn’t count, because that’s you paying off your own property, not spending to earn rent. Neither does the petrol and toll for driving over to check on the place.
Say you rent out a condo at RM2,000 a month for the full year, which comes to RM24,000 in rent. Over that year you paid RM8,400 in loan interest, RM1,000 in assessment, RM100 in quit rent, RM300 for fire insurance, and RM500 to fix a broken water heater. You also spent RM8,000 on new kitchen cabinets.
| Item | Amount (RM) |
| Rent collected | 24,000 |
| Less loan interest | 8,400 |
| Less assessment and quit rent | 1,100 |
| Less fire insurance | 300 |
| Less water heater repair | 500 |
| Net rental income | 13,700 |
The new kitchen cabinets aren’t in the calculation, because they count as an upgrade rather than a repair. Everything else is subtracted from the rent you collected, and the RM13,700 left over is the figure you put in your tax form, along with your salary and any other income.
If you spent more on repairs and upkeep than you collected in rent that year, you can’t use that to lower the tax on your salary, and you can’t carry it forward to the next year either.
This changes if you own more than one property. LHDN adds up all your rentals together, so if one loses money, that can cancel out some of the rent you earned from another in the same year. Say one condo cost you RM3,000 more than it earned, while another brought in RM10,000. You take the RM3,000 off the RM10,000 and declare RM7,000. If the first property lost more than the second one earned, the extra doesn’t roll over to next year.
If you only own one unit, it simply means no tax to pay on the rental that year. It’s still worth declaring the property and entering the nil figure, so your return shows the full picture if LHDN ever asks.
Everything gets filed through the MyTax portal, and the form you use depends on your overall income, not the rental alone.
For a salaried employee with a rental on the side, it’s the usual Form e-BE. Your net rental income, meaning the rent you collected minus the expenses you can claim on the property, goes in the box marked ‘statutory income from rents’. Work that subtraction out before you log in, and keep your workings.
If any of your income counts as business income, whether that’s the rental itself or a side business with different nature, you file Form e-B instead. It has its own rental section, so your Section 4(d) rent stays out of the business profit figures.
Form e-BE is due by 30 April of the following year and Form e-B by 30 June, though e-Filing gives you a grace period to 15 May and 15 July respectively. Our income tax guide covers the rest of the return if this is your first time filing.
Seven years, counted from the end of the relevant year of assessment. That covers the stamped tenancy agreement, your loan and bank statements, and the receipt for every expense you claimed. None of it gets submitted with your return, but in an audit these documents are the proof behind your deductions, and a deduction you can’t back up is one LHDN can reject and recalculate. Digital copies are fine.
If you’ve been collecting rent for years without declaring any of it, you’re far from the only one, but it’s a risky position, because LHDN can go back through past years and raise assessments with penalties on top. The way out is voluntary disclosure, which is treated more leniently than being caught, and LHDN has run formal programmes for exactly this before. A tax agent can walk you through regularising the past years, and that usually costs far less than being audited.
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Pugaleshwaran Raja Kumaran is a Tax Executive Director at ThinkTX Consultants, with over a decade of experience delivering strategic and practical tax solutions. He advises high-net-worth individuals, multinational corporations, and growing businesses, helping them manage complex tax matters with clarity and confidence.
He has extensive experience across a broad range of tax engagements, including corporate tax compliance, Capital Gains Tax (CGT), withholding tax, stamp duty, Real Property Gains Tax (RPGT), Sales and Service Tax (SST), and advisory on inbound and outbound investments. He also leads practice areas covering tax incentives, tax audits and investigations, private client advisory, tax due diligence, and e-Invoicing advisory, providing comprehensive support across the business life cycle.
Beyond client advisory, Pugaleshwaran actively contributes to the tax profession through writing and speaking on Malaysian tax policy, regulatory developments, and industry best practices. His work has been published by the International Bureau of Fiscal Documentation (IBFD) and Wolters Kluwer (CCH), including contributions to Malaysia’s Sales and Service Tax (SST) content updates.
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As a trusted tax partner of RinggitPlus, Pugaleshwaran reviews and verifies Malaysian taxation content to ensure it is accurate, compliant, and relevant for everyday Malaysians.
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