---
title: "Rental Income Tax Malaysia 2026: What Landlords Must Declare"
description: "Rental income is taxed under Section 4(d) on net rent at scale rates of 0% to 30%. Deductions, vacant periods, losses and Form BE filing for 2026."
datePublished: "2026-06-01"
dateModified: "2026-06-01"
canonical: "https://www.superhomes.my/resources/rental-income-tax-malaysia-2026"
---

# Rental Income Tax Malaysia 2026: What Landlords Must Declare

Yes, rental income is taxable in Malaysia. A resident landlord pays tax on net rent (gross rent minus allowable expenses such as loan interest, quit rent, assessment and repairs) at the normal scale rates of 0% to 30%, declared in Form BE by 30 April. Non-residents pay a flat 30% on the net rent.

If you own a condo in Mont Kiara, a terrace house in Petaling Jaya, or a shoplot in Johor Bahru that you rent out, the income you collect is not yours to keep quietly. The Lembaga Hasil Dalam Negeri (LHDN), Malaysia's Inland Revenue Board, treats rental income as taxable, and the obligation to declare it falls on you as the property owner. Many landlords assume that a few thousand ringgit a month from a single unit flies under the radar. It does not. Tenancy agreements are now stamped through LHDN's own MyTax system, and bank records show regular rent credits, so undeclared rental income is one of the easier things for LHDN to find.

This guide covers the 2025 year of assessment (filed in 2026) and the 2026 year of assessment: whether your rental is taxable, what counts as rental income, which expenses you can deduct, how to fill in your BE form, the tax rates that apply, the special rules for short-term rentals like Airbnb, and the penalties for getting it wrong. (Source: Income Tax Act 1967 s.4(d); LHDN Public Ruling No. 12/2018, Income from Letting of Real Property; checked 30 Sep 2026.)

## Is Rental Income Taxable in Malaysia?

Yes. Rental income is taxable in Malaysia, and the legal basis is **Section 4(d) of the Income Tax Act 1967**, which classifies income from rents, royalties, and premiums as a distinct source of chargeable income. This sits separately from employment income under Section 4(b) and business income under Section 4(a). Letting becomes a Section 4(a) business only when you provide maintenance or support services "comprehensively and actively" (more on that in the short-term rental section below).

The obligation to declare applies to a broad group of people:

| Who must declare rental income | Notes |
|---|---|
| Malaysian-resident individuals | Declared in Form BE (no business) or Form B (with business income) |
| Non-resident individuals (foreigners) | Taxed at a flat 30% on Malaysian-sourced rental, declared in Form M |
| Companies owning rental property | Declared via Form C under corporate tax rules |
| Joint owners | Each owner declares their proportionate share |
| Inherited or gifted property owners | Liable from the date legal ownership/benefit passes |

The key principle is that the income must be **Malaysian-sourced**, which for rent means the property is located in Malaysia. It does not matter whether you are physically in the country or whether the rent is paid into a foreign bank account. If the building sits on Malaysian soil and earns rent, that rent is within LHDN's reach, whether it is a studio in the [KL City Centre](/area/kuala-lumpur/kl-city-centre) or a heritage shophouse in [George Town](/area/penang/george-town).

The Section 4(d) source starts on the date the property is let out for the first time. You must declare rental income even if, after deductions, the property runs at a net loss. LHDN treats all your non-business lettings as **one single Section 4(d) source**, so a loss on one property is netted against profit on another in the same year of assessment. (Source: LHDN Public Ruling No. 12/2018, paras 6 and 7; checked 30 Sep 2026.)

## What Counts as Rental Income?

"Rental income" is broader than the monthly rent. For tax purposes, LHDN starts from the **gross income** from letting the property before any deductions. The following are treated as rental income:

| Type of receipt | Treated as income? |
|---|---|
| Monthly rent collected | Yes |
| Advance rent (rent paid ahead of the period) | Yes, in the year received |
| Forfeited security deposit (e.g. tenant breaks lease) | Yes, once forfeited it becomes income |
| Charges for use of furniture and fittings | Yes |
| Payments for services bundled into the rent (e.g. cleaning, Wi-Fi) | Yes |
| Compensation received for premature termination | Generally yes |

Equally important is knowing what is **not** rental income:

- **Refundable security and utility deposits** while still held. These are liabilities you owe back to the tenant, not income. They only become taxable income at the point they are lawfully forfeited.
- **Capital receipts**, such as the sale proceeds of the property itself. These fall under Real Property Gains Tax (RPGT), not income tax.
- **Reimbursements that simply pass through**, where the tenant repays you for a cost you paid on their behalf, with no markup.

A common timing question is when rental income is recognised. Under Section 4(d), rent received in advance is taxed in the basis period in which it is received, and expenses relating to that income are allowed in the same basis period. So if a tenant pays you twelve months of rent in advance in December 2025, the full amount is income for the year of assessment 2025, even though eleven months of occupancy fall in 2026. (Source: LHDN Public Ruling No. 12/2018, para 9.2; checked 30 Sep 2026.)

## Allowable Deductions for Landlords

You are taxed on **net rental income**, not gross. You may deduct expenses that are **wholly and exclusively incurred in the production of that rental income** under Section 33(1) of the Income Tax Act. The catch is the distinction between revenue expenses (deductible) and capital expenses (not deductible against rental income).

Here is a practical breakdown of what you can and cannot claim:

| Expense | Deductible? | Notes |
|---|---|---|
| Mortgage loan interest | Yes | Only the interest portion, not the principal; restricted under s.33(2) if part of the loan was not used for the rented property |
| Quit rent (cukai tanah) | Yes | Annual land tax paid to the state |
| Assessment rates (cukai pintu / cukai taksiran) | Yes | Paid to the local council |
| Fire / property insurance premiums | Yes | For the rented property |
| Repairs and maintenance | Yes | To restore the property to its existing condition |
| Service charge / maintenance fee (strata) | Yes | For condos and apartments under a JMB/MC |
| Sinking fund contributions | Generally yes | Where they relate to maintenance of common property |
| Property management / rent collection fees | Yes | Managing the unit and collecting rent |
| Renewal of a tenancy or finding a subsequent tenant | Yes | Includes stamp duty and legal fees on a renewed tenancy agreement and agent fees for a replacement tenant |
| Utilities paid by the landlord | Yes | Only where the tenancy agreement says rent includes them and you pay the bills |
| Replacement of furnishings | Yes | Replacing existing furniture or appliances in a s.4(d) letting |
| Cost of finding the first tenant | No | An initial expense of establishing the income source |
| Expenses while vacant between tenancies or under repair | Yes, if ready to let | Allowed once the property has been let before and is kept in good condition and available to let; tenant gaps count for up to 2 years |
| Expenses before the property is first let | No | Pre-letting costs, including interest, are not allowed |
| Renovation, extension, improvement | No | Capital in nature; may count toward the RPGT cost base on sale |
| Initial purchase of furniture and appliances | No | Capital; no capital allowances on a non-business letting |
| Principal repayment of the loan | No | Only interest qualifies |

(Source: LHDN Public Ruling No. 12/2018, paras 8.3 to 8.6 and the section on replacement cost of furnishings; checked 30 Sep 2026.)

The single most misunderstood line here is **repairs versus renovation**. If you patch a leaking roof, repaint walls back to their original state, or fix a broken air-conditioner, that is a deductible repair. If you knock down a wall to create an open-plan kitchen, add a new bathroom, or upgrade the unit beyond its original condition, that is a non-deductible capital improvement. Keep your invoices clearly labelled, because LHDN may ask you to justify the classification on audit.

Timing matters too. The Section 4(d) source only starts when the property is let out for the first time, so expenses incurred before that date, including loan interest while the unit sits empty after key collection, are not deductible. Once the unit has been let, the position changes: expenses for a vacant period between tenancies **are deductible**, provided the property is clearly ready and available to be let again. The same applies when letting stops temporarily for repairs or renovation, a legal injunction or other circumstances beyond your control, as long as the property is kept in good condition and ready to let. Gaps with no tenant are covered for up to 2 years after a tenancy ends; expenses beyond that 2-year window are not allowed. (Source: LHDN Public Ruling No. 12/2018, paras 8.4.1, 8.4.2 and 8.5; checked 1 Oct 2026.) For practical advice on getting a unit market-ready and let quickly, see our [landlord guide to renting out property](/resources/how-to-rent-out-property-malaysia).

Stamp duty on a **renewed** tenancy is one of the deductible costs, and it rose from 1 January 2025. Under the Finance Act 2024, tenancy agreements are stamped at RM1, RM3, RM5 or RM7 for every RM250 of annual rent, for terms of up to 1 year, over 1 to 3 years, over 3 to 5 years, and over 5 years respectively. The old exemption on the first RM2,400 of annual rent was removed, and the minimum duty is RM10. A two-year renewal at RM2,000 a month (RM24,000 a year, or 96 units of RM250) now costs RM288 in stamp duty. Since 1 January 2026, tenancies are self-assessed and stamped through e-Duti Setem on MyTax under phase 1 of LHDN's stamp duty self-assessment system. (Source: Stamp Act 1949, First Schedule item 49 as amended by the Finance Act 2024, in force 1 January 2025; LHDN STSDS phase 1, 1 January 2026; checked 30 Sep 2026.) Our [tenancy agreement guide](/resources/tenancy-agreement-malaysia) and [stamp duty guide](/resources/stamp-duty-malaysia-2026) walk through the stamping steps.

## How to Declare Rental Income (BE Form)

Most individual landlords who earn employment income plus rental income, and no business income, file using **Form BE**. If you also run a business, you use Form B instead. The filing is done online through **e-Filing on the MyTax portal**.

Here is how the figures flow:

1. **Calculate gross rental income** for the year: total all rent and other taxable receipts per property.
2. **Total your allowable deductions** for each property (interest, quit rent, assessment, insurance, repairs, service charge, etc.).
3. **Net rental income = gross rental income minus allowable deductions.** Work it out per property, then add them up. Because all your non-business lettings form one Section 4(d) source, a loss on one property offsets profit on another in the same year.
4. **Enter the aggregate net rental figure** in the statutory income section of Form BE for rents under Section 4(d). The e-Filing form has a dedicated field for "Pendapatan berkanun – sewa" (statutory income – rent).
5. The system combines this with your employment income and other sources, applies your reliefs and rebates, and computes the tax payable.

A worked structure for a single property:

| Line | Amount (RM) |
|---|---|
| Gross annual rent (RM2,000 × 12) | 24,000 |
| Less: mortgage interest | (10,000) |
| Less: quit rent + assessment | (1,200) |
| Less: insurance | (600) |
| Less: service charge / maintenance | (3,600) |
| Less: repairs | (1,000) |
| **Net rental income** | **7,600** |

**Filing deadlines** for the year of assessment 2025 (filed in 2026):

| Form | Taxpayer | Deadline |
|---|---|---|
| Form BE | Individuals without business income | 30 April 2026; e-Filing extended to 15 May 2026 |
| Form B | Individuals with business income | 30 June 2026 (e-Filing usually gets a grace period to 15 July) |
| Form M | Non-resident individuals | 30 April 2026 (no business income) |
| Form C | Companies | Within 7 months of financial year-end |

(Source: LHDN Return Form Filing Programme 2026; e-Filing opened 1 March 2026; checked 30 Sep 2026.)

Keep all supporting documents (tenancy agreements, stamping certificates, bank statements showing rent received, and expense receipts) for at least **seven years**, the record-keeping period under Section 82 of the Income Tax Act 1967, as LHDN can request them during this period.

## Tax Rates on Rental Income 2026

Net rental income for a resident individual is **not taxed at a separate flat rate**. It is added to your other income (salary, taxable dividends and so on) and taxed at Malaysia's **progressive personal income tax rates**, from 0% up to 30% for the highest band. Your effective rate therefore depends on your total chargeable income.

The resident individual scale for the years of assessment 2025 and 2026 is:

| Chargeable income (RM) | Rate on band |
|---|---|
| 0 – 5,000 | 0% |
| 5,001 – 20,000 | 1% |
| 20,001 – 35,000 | 3% |
| 35,001 – 50,000 | 6% |
| 50,001 – 70,000 | 11% |
| 70,001 – 100,000 | 19% |
| 100,001 – 400,000 | 25% |
| 400,001 – 600,000 | 26% |
| 600,001 – 2,000,000 | 28% |
| Above 2,000,000 | 30% |

(Source: Income Tax Act 1967, Schedule 1 resident individual rates, unchanged for YA 2025 and YA 2026, as tabulated in PwC's Malaysia individual tax summary; checked 30 Sep 2026.)

**Non-resident individuals** pay a flat **30%** on their Malaysian income, including net rent, with no access to the resident bands or personal reliefs. Tax residence generally depends on being physically present in Malaysia for 182 days or more in the basis year.

**Is there still a 50% exemption on residential rent?** A 50% exemption on rent of up to RM2,000 a month per residential home applied to Malaysian resident landlords for the years of assessment 2018 to 2020 (Income Tax (Exemption) (No. 2) Order 2019, P.U.(A) 55/2019). We could not confirm any version of it in force for the year of assessment 2026 as at 30 Sep 2026, so do not claim it unless your tax agent confirms a current exemption order.

### Worked example: RM2,000/month rent, RM1.2M loan

Imagine you let a high-end condo for **RM2,000 a month** and financed it with a **RM1.2 million loan** at about 4.0% a year, a typical rate with the OPR at 2.75% (held on 3 September 2026). First-year interest is about RM48,000. Here is the picture:

| Line | Amount (RM) |
|---|---|
| Gross annual rent (RM2,000 × 12) | 24,000 |
| Less: mortgage interest charged (~RM48,000) | (48,000) |
| Less: quit rent + assessment | (1,200) |
| Less: insurance | (600) |
| Less: service charge | (4,800) |
| Less: repairs | (1,500) |
| **Net rental result** | **(32,100) loss** |

The deductible expenses, mainly the interest, **exceed the gross rent**, so the property produces a **net rental loss of RM32,100** for the year. That loss is absorbed by rental profit from any other property you let in the same year, because all your lettings form one Section 4(d) source. It generally cannot be set against your salary, and a Section 4(d) loss is generally not carried forward to future years, so its only value is that within-year netting. A highly geared property in its early years often shows a paper loss, which is normal and legitimate to report.

Now flip it: suppose the loan is small or fully paid, so interest is only **RM5,000**. Net rental income becomes RM24,000 − RM5,000 − RM1,200 − RM600 − RM4,800 − RM1,500 = **RM10,900**. If your top marginal rate is 19%, the additional tax on this rental income is about **RM2,071**. This is exactly why gearing and yield matter; see our analysis of [the best areas for rental yield in KL](/resources/best-rental-yield-kl-2026).

## Short-Term Rental (Airbnb): Different Tax Treatment?

Short-term rentals on Airbnb, Booking.com and similar platforms can be treated differently from a standard long-term tenancy. The deciding factor is whether you provide maintenance or support services **comprehensively and actively**. If you do, the letting is a **business source under Section 4(a)**; if you let the unit without those services, or the services come passively from the building's management corporation, it stays a **non-business source under Section 4(d)**. (Source: LHDN Public Ruling No. 12/2018, paras 4 and 5; checked 30 Sep 2026.)

Indicators that point toward a business include:

- High turnover of guests and active, ongoing marketing of the unit.
- Hotel-like services you provide yourself or through staff: cleaning between stays, linen changes, breakfast, concierge, check-in support.
- Operating multiple units in a systematic, organised manner.
- Staffing or management infrastructure.

Why does the classification matter?

| Aspect | Passive rental (4d) | Business activity (4a) |
|---|---|---|
| Form used | Form BE | Form B |
| Capital allowances on furniture/equipment | Not available (replacement cost deductible instead) | Available |
| Loss treatment | Netted within the s.4(d) source that year | Business loss rules; set-off against aggregate income and carry-forward possible |
| Start date of the source | Date first let | Date the property is made available for letting |

On **indirect taxes**: accommodation premises, tourism tax and service tax on accommodation are a separate regime from the rental-and-leasing service tax, and each has its own registration rules. If your short-term operation is large enough to be run as an accommodation business, take advice before you pass the turnover threshold. Note too that some local councils and state authorities (for example in parts of Penang and Kuala Lumpur) have their own short-term rental rules, and in strata buildings the JMB or MC bylaws may prohibit short-term letting entirely, regardless of the tax position.

**Commercial landlords, take note:** rental and leasing of commercial property has been subject to service tax since 1 July 2025, at 8% until 31 December 2025 and **6% from 1 January 2026**. Residential property is excluded. Registration kicks in once taxable rental passes RM1 million a year, and tenants that are micro, small and medium enterprises (MSMEs) with annual sales up to RM1.5 million (raised from RM1 million from 1 January 2026) are exempt; these thresholds have been revised several times, so check the current position with the Royal Malaysian Customs Department or your tax agent. (Source: Service Tax Policy 2/2025 as amended, summarised by KPMG Malaysia, January 2026; checked 30 Sep 2026.)

The practical message: a single condo you occasionally rent out short-term is usually still passive rental income declared in Form BE. A portfolio of serviced units run like a hospitality business is likely a Section 4(a) business with its own registration, capital allowance and possibly indirect tax obligations.

## FAQs

### Q: Can I deduct renovation costs against my rental income?

No, not as a rental expense. Renovation, extension and improvement works are capital in nature, and rental income only allows revenue expenses such as repairs that restore the property to its existing condition. Repainting a wall is a deductible repair; building a new partition or upgrading the kitchen is not. Genuine improvement costs may be added to your cost base when you sell, reducing your RPGT, so keep the receipts.

### Q: Can I deduct the water and electricity bills I pay for my tenant?

Yes, if the tenancy agreement states that the rent includes utilities and you, as landlord, actually pay the bills. Those payments are then an expense of producing the rental income and can be deducted from the gross rent. If the tenant pays the utility provider directly, there is nothing for you to deduct. Keep the bills with your tenancy agreement so the treatment is easy to show if LHDN asks.

### Q: Can I deduct my housing loan interest from rental income in 2026?

Yes. Interest on the loan used to buy the rented property is deductible against the rent for the period it is let, but not the principal. Interest for the period before the property was first let is not deductible. After the first letting, interest during a vacant spell between tenants (up to 2 years) or while the unit is under repair remains deductible, provided the property is kept ready and available to let. If part of the loan was used for something else, the interest is restricted under Section 33(2).

### Q: Is a rental deposit taxable?

Not while you hold it. A refundable security or utility deposit is money you owe back to the tenant, so it is not income when received. It becomes taxable rental income only when you lawfully forfeit it, for example to cover unpaid rent when a tenant breaks the lease early. Declare the forfeited amount in the year you keep it, and deduct any repair costs it pays for.

### Q: How is rental income split for jointly owned property?

Each co-owner declares their proportionate share of both the rental income and the deductible expenses, based on their ownership share on the title. If a married couple owns a property 50:50, each spouse reports half the net rental income in their own tax return. This spreads the income across two sets of tax bands and reliefs, which can lower the combined tax. The split must reflect genuine legal ownership, not an arrangement made purely to reduce tax.

### Q: What happens if I didn't declare rental income last year?

Make a voluntary disclosure to LHDN as soon as possible rather than wait to be caught. Under-declaring income can attract a penalty of up to 100% of the tax undercharged under Section 113(2), and serious cases can be prosecuted. Coming forward before any audit or investigation begins generally results in much lower penalties. LHDN can reopen past years, so the exposure grows the longer the omission stands. Engage a tax agent if the amounts are significant.

### Q: Do I need to make EPF contributions on rental income?

No. EPF contributions are tied to employment and are paid on wages by an employer and employee. Rental income is property income, not employment income, so it carries no EPF obligation, and the same applies to SOCSO and EIS. Your only statutory obligation on rental income is the income tax declared in your BE or B form. If you run short-term rentals as a business with staff, EPF and SOCSO apply to their wages, not to your rent.

### Q: Do tenants pay tax on the rent they pay?

No. Income tax on rent is the landlord's liability, not the tenant's, and residential rent carries no service tax. Tenants of commercial premises may see 6% service tax on their rent from 1 January 2026 if the landlord is registered. Where tenants do pay something, it is usually the tenancy stamp duty, which the agreement often puts on the tenant. Your landlord declares the rent you pay as their income; you have nothing to declare.

## Declare With Confidence and Maximise Your Yield

Declaring rental income correctly protects you from penalties and gives you the full benefit of every legitimate deduction. The best landlords treat tax as part of the investment plan from day one: choosing the right property, structuring ownership sensibly, and keeping clean records.

If you are ready to grow your portfolio, compare current stock in rental-heavy areas such as the [KL City Centre](/area/kuala-lumpur/kl-city-centre) and [George Town](/area/penang/george-town), explore [new project launches](/new-projects) with strong rental fundamentals, or connect with an agent through our [agents directory](/agents) who can advise on the best rental markets across Malaysia.