Guide for landlord to report rental income to tax authority in Malaysia

Updated: 28 Jul 2025

If you have rental income as an individual, then this article will help you understand and navigate the income received from letting of real property to ensure you are in compliance with our tax regulation and maximise your tax deductions.

Background

Generally, rental income generated from letting of real property in Malaysia is subject to tax under the Income Tax Act 1967 (“ITA”). The Inland Revenue Board further issued a Public Ruling No. 12/2018 (“PR No. 12/2018”) dated 19 December 2018 to clarify the tax treatment on income received from letting of real property.

Letting of Real Property as a business source under Section 4(a) of the ITA or non-business source under Section 4(d) of the ITA?

Letting of real property is deemed as a business source and charged to tax under Section 4(a) of the ITA if maintenance or support services are comprehensively & actively are provided in relation to the real property.

If you are a property owner who does not comprehensively and actively provide any maintenance and support services such as cleaning services, repair services to both structural elements and exterior parts of the real property, then your rental income is treated as a non-business source and charged under Section 4(d) of the ITA. By actively, it simply means providing any maintenance and support services yourself or hiring another person/firm to provide the maintenance services or support services.

Differences between chargeability of Section 4(a) and 4(d) of the ITA

For business income under Section 4(a) of the ITA:-

• Direct and indirect expenses incurred wholly and exclusively in the production of rental income [Section 33 (1) of the ITA] are tax deductible expenses.
• Any business loss in the current year can be set off against aggregate income in the year of assessment and can also be carried forward.
• Capital allowances can be claimed.

For non-business income under Section 4(d) of the ITA:-

• Only direct expenses incurred are tax deductible expenses.
• Restriction on current year tax loss for instances rental loss for Property A can only be offset against net rental income from Property B.
• The remaining tax loss for the current year will be disregarded.
• No capital allowances can be claimed.

What are the direct expenses allowable to be deducted from rental income under Section 4(d) of the ITA?

Below are examples of direct expenses eligible for deductions against rental income:-

• Property loan interest
• Fire insurance premium
• Quit rent and assessment
• Rental renewal stamp duty
• Property agent commission
• Renewal of tenancy agreement expense
• Repair and maintenance expenses
• Replacement cost of furnishings
• Enforce rent collection fees including legal expenses
• Property service charge, maintenance fees, sinking fund and sewerage charges

Direct expenses incurred initially to create a source of rental income are NOT eligible for tax deductions against rental income such as:-

• Advertising cost to get the first tenant
• Property agent fees/commissions to obtain first tenant
• Legal cost and stamp duty for first tenancy agreement

Summary

There is a Public Ruling i.e. No. 12/2018 to determine if rental income from letting of real property was chargeable as business source or non-business source and also the deductibility of expenses incurred thereafter. 

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