How to Submit Rental Income for LHDN Malaysia

Submitting Rental Income for Lembaga Hasil Dalam Negeri (LHDN)

Rental Properties Malaysia: Income Tax Act 1967

Are you a property investor? Are you an owner of a few properties rented out?

Expenditure allowable for deductions from the rental income of a taxable property are as the following:

• Assessment tax  (cukai taksiran or cukai pintu)
• Quit rent (cukai tanah)
• Interest on borrowings/loans
• Fire insurance premium
• Rental collection expenses
• Legal expenses incurred to enforce rental collection
• Rental renewal expense (tenancy agreement, property agent)
• Repair expenses 
• Property service charges (maintenance fee, sinking fund, Indah Water)

Initial expenses are not allowed for deductions from rental income of real estate where spending is used to create this source of income. For example, the cost of getting the first tenant such as advertising costs, legal costs to make rental agreements, stamp duty and commissions to real estate agents are not eligible.

The following is an example of calculation.

Based on HK-4 Form from LHDN

GROSS RENTAL INCOME	RM2000x12 = RM24000
Allowable expenses
Interest expense (loan)	-RM1250 x12 =Rm15000 (instalment RM1650)
Tax Assessment / Door Tax	-RM130
Quit Rent	-RM30
Insurance
Repair and maintenance
Renewal of rental agreement
Indah Water	-RM30x4 = RM120
Maintenance fee, sinking, guard house
STATUTORY RENTAL INCOME	RM8720
50% off rental income	-RM4360
TAXABLE INCOME	RM4360

Reference:

PENDAPATAN DARIPADA SEWAAN HARTA TANAH KETETAPAN UMUM NO. 4/2011
PENDAPATAN DARIPADA SEWAAN HARTA TANAH KETETAPAN UMUM NO. 12/2018
http://lampiran1.hasil.gov.my/pdf/pdfam/KU_12_2018.pdf

Rental Properties Malaysia: Income Tax Act 1967

Income obtained from letting properties is taxable under the paragraph 4(a) of Income Tax Act 1967 (ITA). These includes rental from commercial properties, houses, shoplots, apartments, factories, office and etc. 

Failure to declare the income may be subjected to penalty based on the provisions under ITA 1967.

Many people have rental income when they are retired in their golden age. Some people have rental properties as part of their wealth creation or a way to achieve financial freedom or retire young. Hence, declaration of income must be made even if you only have one source of income from rental properties.

In order to declare rental income in LHDN, a stamped tenancy agreement should be made available. Note that, this document is also an important proof of income for bankers if you are planning to buy another property.