Rental Income Tax 2024 in Malaysia, And Other Tax Reliefs For YA 2023!

PropertyGuru Editorial Team
Rental Income Tax 2024 in Malaysia, And Other Tax Reliefs For YA 2023!

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When it comes to the season of income tax in Malaysia, that’s when people tend to leave things till the last minute (are you one of them?) and then make careless mistakes out of panic.
One such mistake that’s cropping up more often involves rental. It turns out that people are getting penalised under Section 113 of the Income Tax Act 1967 for under-reporting (or not reporting at all) their rental income.
There’s this misconception that rental income is classified under an investment and can therefore be exempted from any form of taxation.
Wrong!
But before we dive deeper, let’s take a closer look at what this Act is all about. According to the Inland Revenue Board Malaysia (LHDN), this involves:
“Any person who makes an incorrect return by omitting or understating any income or gives any incorrect information in relation to any matter affecting his own chargeability to tax or the chargeability to tax of any other person.”
income tax, rental income exemption malaysia 2020
If that’s too much of a mouthful, let us simplify it for you: it basically means that you’re trying to avoid being taxed by not properly declaring how much you earn from renting out your property.
But before we can even begin to touch on the topic of paying income tax on rental income, let’s get back to basics.

What Is Rental Income Tax?

Rental income tax is a tax imposed upon profit that you make from renting out properties.
The rental income applies to both residential and commercial properties, and even certain machinery and ships (known as movable properties).

When is the deadline for LHDN e-filing 2024?

Do take note of these dates if you fall under these categories, and submit on time to avoid being fined! Check out the full categories here!

Category

Date

Resident Individuals Who Do Not Carry On Business30 April 2024
Resident Individuals Who Carry On Business30 June 2024

Rental Income vs Business Income

But there’s a difference between rental income and business income.
Rental income is filed under Section 4(d) of the Income Tax Act 1967. If you’re renting a property for business purposes, however, your rental income is filed under Section 4(a) of the Act under business income.
income tax, rental income exemption malaysia 2020
Generally, rental income is considered non-business income that is derived relatively passively. If your rental property is managed in a very systematic manner, it can be regarded as business income.
To be fair, that’s still very vague – so let’s see how else the two differ.

Rental income

Business income

● Derived passively
● Mostly self-managed, facilities and support are not actively provided
●Derived actively
● Ample management, facilities and support are actively provided
●Commercial letting of 4 or more commercial units, floors of shophouses residential properties

How Is Rental Income Taxed In Malaysia?

Rental income in Malaysia is taxed on a progressive tax rate from 0% to 30%. The rental income commencement date starts on the first day the property is rented out, whereas the actual rental income itself is assessed on a receipt basis.
Rental income is valued on a net basis, which means that the net rental income can be reduced with certain deductible expenses.
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What Expenses Can Be Deducted From Rental Income In Malaysia?

So, what are these deductible expenses for rental income? According to LHDN, they include:
  • Assessment tax
  • Quit rent
  • Interest on home loan
  • Fire insurance premium
  • Expenses incurred on rent collection
  • Expenses incurred on rent renewal
  • Expenses on repairs and property maintenance
income tax, rental income exemption malaysia 2020
Rental income expenses which are not deductible are initial expenses. These include:
  • Costs to advertise the property
  • Legal costs in preparing the rental agreement
  • Stamp duty
  • Property agent commission

How To Calculate Your Net Rental Income?

With all that said, here’s an example of how to calculate your net rental income.
  • Gross rental income
  • Monthly rent: RM1,000
  • Contract term: 12 months
  • Deductible expenses
  • Assessment tax: RM500
  • Quit rent: RM50
  • Property repairs: RM5,000
Net rental income(1,000 x 12) – (500 + 50 + 5,000)
= 12,000 – 5,550
= 6,450

How To Declare Rental Income In Malaysia?

Let’s make sure you know how to declare yours properly. Individuals who own a property in Malaysia (that isn’t used for business purposes) and receive a rental income are subject to income tax.
This is explained in greater detail under Section 4(d) of the same Act. So, the first thing you need to take note of is how the income from your property rental is calculated.
income tax, rental income exemption malaysia 2020
Its valuation is on a net basis, which means that the amount you earn can be reduced by permitted expenses incurred.
Some of these permitted expenses include the cost of ordinary repairs to maintain the property in its existing state, insurance premium on fire/burglary, assessment tax and quit rent, as well as mortgage interest on loan obtained.
Assessment tax is just a fancy term for a type of compulsory payment that the local authorities would charge on every home and land owner. The money that’s collected will finance the construction and maintenance of all public infrastructure.
How it’s calculated will be based on the estimated annual rental value of the property, multiplied by a set of rates determined by local authorities (so it can really vary).
Once you’ve done that, any net gain would need to be filed.
You can do so under the ‘Statutory income from rents’ when making an online submission; and part B2 (in the BE form) or part B7 (in the B form) when making a manual submission.
If, however, you come up with a rental loss, then you’re not required to disclose that in your tax filings.
income tax, rental income exemption malaysia 2020

How Do I File My Income Tax?

Before finding out the step-by-step on how to file your tax , you’ll first have to find out if you even need to pay income tax at all. You’re eligible as a taxpayer if:
  • Your annual income after EPF deduction is RM34,000 and above (approx. RM2,833.33 per month)
  • You have been in Malaysia for at least 182 days within the year
After you’ve determined that you’re in fact, obligated to file income tax, you’ll then need to find out how much income tax you need to pay based on your chargeable income.
income tax, rental income exemption malaysia 2020
Filing for income tax usually begins in the first quarter of the year for the previous Year of Assessment (YA). This means that in 2022, you’ll be filing your taxes for YA 2021 that ends on 31 December 2021.
You’ll only be given a few months to file your income tax, so be sure to keep all your payslips, EA Forms, and receipts as you’ll need them to file your taxes.
If you only manage to file your income tax after the deadline, you will have to pay a penalty. The same also goes if you overstate your tax reliefs or misreport your earnings, so be honest!
Filing for income tax can be done online via MyTax or manually at the Lembaga Hasil Dalam Negeri (LHDN).

How Do I Find Out My Chargeable Income?

Income tax is chargeable on most types of income, such as:
  • Gains from a business
  • Gains from employment
  • Dividends, interests and discounts
  • Royalties, premiums and rent
income tax, rental income exemption malaysia 2020
The amount you end up with after you’ve added together all your various incomes will then be used to determine your respective tax rate. Refer to this link for the latest tax rates (YA 2021).
As you can see – the lower your chargeable income, the lower your tax rate and the less income tax you’ll have to pay.

What Are The Tax Reliefs For YA2023?

Here’s where tax reliefs come in. Essentially, tax reliefs are certain portions of your income that don’t have to be included in the sum of your total chargeable income.
This means they help to reduce your total chargeable income – so make sure you keep those receipts and always be in the know of the latest tax relief updates!
Below is a list of personal income tax reliefs for filing in YA2023. You can also refer to the official LHDN list here.
1
Individual and dependent relatives
9,000
2
Medical treatment, special needs and carer expenses for parents



(Medical condition certified by medical practitioner)
8,000 (Restricted)
3
Purchase of basic supporting equipment for disabled self, spouse, child or parent
6,000 (Restricted)
4
Disabled individual
6,000
5
Education fees (Self):



Other than a degree at masters or doctorate level – Course of study in law, accounting, islamic financing, tehcnical, vocational, industrial, scientific or technology



Degree at masters or doctorate level – Any course of study



Course of study undertaken for the purpose of upskilling or self-enhancement



(Restricted to RM2,000)
7,000 (Restricted)
6
Medical expenses on:



Serious diseases for self, spouse or child



Fertility treatment for self or spouse Vaccination for self, spouse and child



(Restricted to RM1,000)
10,000 (Restricted) *Combined with 6,7 and 8
7
Expenses (Restricted to RM1,000) on:



Complete medical examination for self, spouse or child



COVID-19 detection test including purchase of self-detection test kit for self, spouse or child



Mental health examination or consultation for self, spouse or child
8
Expenses (Restricted to RM4,000) for child aged 18 and below:



Assessment of intellectual disability diagnosis



Early intervention programme / intellectual disability rehabilitation treatment
9
Lifestyle – Expenses for the use / benefit of self, spouse or child in respect of:



Purchase or subscription of books / journals / magazines / newspapers / other similar publications (Not banned reading materials)



Purchase of personal computer, smartphone or tablet (Not for business use)



Purchase of sports equipment for sports activity defined under the Sports Development Act 1997 and payment of gym membership



Payment of monthly bill for internet subscription (Under own name)
2,500 (Restricted)
10
Lifestyle – Additional relief for the use / benefit of self, spouse or child in respect of:



Purchase of sports equipment for any sports activity as defined under the Sports Development Act 1997



Payment of rental or entrance fee to any sports facility



Payment of registration fee for any sports competition where the organizer is approved and licensed by the Commissioner of Sports under the Sports Development Act 1997
500 (Restricted)
11
Purchase of breastfeeding equipment for own use for a child aged 2 years and below

(Deduction allowed once in every TWO (2) years of assessment)
1,000 (Restricted)
12
Child care fees to a registered child care centre / kindergarten for a child aged 6 years and below
3,000 (Restricted)
13
Net deposit in Skim Simpanan Pendidikan Nasional (Net deposit is the total deposit in 2023 MINUS total withdrawal in 2023)
8,000 (Restricted)
14
Husband / wife / payment of alimony to former wife
4,000 (Restricted)
15
Disabled husband / wife
5,000
16a
Each unmarried child and under the age of 18 years old
2,000
16b
Each unmarried child of 18 years and above who is receiving full-time education (“A-Level”, certificate, matriculation or preparatory courses).
2,000
Each unmarried child of 18 years and above that:



receiving further education in Malaysia in respect of an award of diploma or higher (excluding matriculation/ preparatory courses).



receiving further education outside Malaysia regarding an award of degree or its equivalent (including Master or Doctorate).



the relevant government authority shall approve the instruction and educational establishment.
8,000
16c
Disabled child
6,000
Additional exemption of RM8,000 disable child age 18 years old and above, not married and pursuing diplomas or above qualification in Malaysia @ bachelor degree or above outside Malaysia in program and in Higher Education Institute that is accredited by related Government authorities
8,000
17
Life insurance and EPF



Civil servants’ pension schemes, non-civil servants pension schemes and self-employed category:



Mandatory contributions to approved schemes or voluntary contributions to EPF (excluding private retirement schemes) or contributions under any written law (Restricted to RM4,000)



Life insurance premium payments or family takaful contributions or additional voluntary contributions to EPF (Restricted to RM3,000)
7,000 (Restricted)
18
Deferred Annuity and Private Retirement Scheme (PRS)
3,000 (Restricted)
19
Education and medical insurance
3,000 (Restricted)
20
Contribution to the Social Security Organization (SOCSO)
350 (Restricted)
21
Expenses on charging facilities for Electric Vehicle (Not for business use)
Source: LHDN
income tax, rental income exemption malaysia 2020

What Tax Rebates Can Be Claimed For YA2023?

Unlike tax deductions which are reductions in your annual chargeable income, tax rebates are reductions in the amount of tax you pay after having calculated your tax for the year.
Here are the type of rebates:
a
Separate Assessment

Wife

Husband


400

400
b
Joint Assessment

Wife

Husband


400

400
Total
800
b
Asessment Where Husband Or Wife Does Not Has Any Total Income

Wife

Husband




400

400
Total
800
There are also tax rebates for zakat, umrah or other religious trips as below:
a
Zakat/Fitrah
Subject to the maximum of tax charged
b
Departure levy for umrah travel / religious travel for other religions

Restricted to 2x trips
Cabin Economy: Destination Asean (RM8) and Others (RM20)

Cabin Others: Destination Asean (RM50) and Others (RM150)

How About Tax Rebates For Non-Residents Or Expats In Malaysia?

income tax, rental income exemption malaysia 2020
Unfortunately, non-residents and expats don’t have the luxury of any tax reliefs or rebates. Sorry!
Non-residents in Malaysia are classified as those staying less than 182 days within Malaysia, regardless of citizenship or nationality.
But not all non-residents have to pay income tax in the first place! You’re not taxable if you are:
  • Employed in Malaysia for less than 60 days
  • Employed on board a Malaysian ship
  • Age 55 years old and receiving pension from Malaysian employment
  • Receiving interest from banks
  • Receiving tax-exempt dividends
But let’s say these don’t apply to you and you are obliged to pay income tax.
As a non-resident, you’ll be taxed fixed rates (usually 30%) instead of the progressive tax rates that apply to residents. Those rates can be found here.

Using Your Monthly Tax Deduction (MTD/PCB) As Final Tax

income tax, rental income exemption malaysia 2020
The Monthly Tax Deduction (MTD) / Potongan Cukai Bulanan (PCB) is the percentage of your income that is deducted from your employment income and goes towards paying your income tax.
You’ll still need to file your tax returns though!
Since you’ll only be able to benefit from tax reliefs and rebates if you file your own returns, using your MTD as final tax can be dangerous in that you may be paying more than you’d actually need to!
There are, however, a certain percentage of people who can use their MTD as final tax. The criteria are:
  • Your employment income is your only source of income
  • You have been working with the same employer for the past 12 months
  • Your employer has been deducting MTD from you
  • Your employer is not paying any taxes for you
  • You have not opted to file under joint assessment
If you fulfill these criteria, you may choose not to file your returns, and simply use your MTD as final tax.
If so, remember to submit form TP1. This form will help you to claim the tax reliefs you’re eligible for and facilitate for more accurate returns by your employer.

Joint Assessment vs Separate Assessment

income tax, rental income exemption malaysia 2020
For married couples, you’ve probably had to ask yourself the question “Should we file separately or under joint assessment?”
In the end, the question is one that boils down to which method will give the most tax savings by leveraging on the progressive tax rates as well as reliefs. As a general rule to go by:
  1. Separate assessment is beneficial if: Both are high-income earners
  2. Joint assessment is beneficial if: One has a significantly higher income, while the other earns little or no income
This is because the combined income of both high-income earners may result in them being subjected to a higher tax bracket, and hence have to pay a higher tax rate.
This applies to tax reliefs as well, since filing under joint assessment means you’re essentially filing as one person – you can only claim the maximum tax reliefs of an individual.
It goes without saying then, that the best way to find out which option will result in the most tax savings for you is to simply calculate separately and compare.
Whether you agree or not with this incentive, the most important thing to remember is to declare your income tax as accurately as possible to avoid any unwanted punishment.
It’s also a good idea to compile and retain any receipts or documents for a few years, in case you’re suddenly called for a tax audit – it’s better to be safe than sorry!
Disclaimer: The information is provided for general information only. PropertyGuru International (Malaysia) Sdn Bhd makes no representations or warranties in relation to the information, including but not limited to any representation or warranty as to the fitness for any particular purpose of the information to the fullest extent permitted by law. While every effort has been made to ensure that the information provided in this article is accurate, reliable, and complete as of the time of writing, the information provided in this article should not be relied upon to make any financial, investment, real estate or legal decisions. Additionally, the information should not substitute advice from a trained professional who can take into account your personal facts and circumstances, and we accept no liability if you use the information to form decisions.

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