Sec 4 (d): Rental Income

In Malaysia, rental income can be derived from the following sources:

a. letting out of land, commerical buildings or residential properties such as terrance houses, flats and condominiums b. letting out of ships, plant, machinery or motor vehicles.

Section 4(a)

Rental income assessed as business source is one source. All rental income of the properties are aggregated and revenue expenses are deducted therefrom.

The commencement of rental income is on the date the property is made available for letting. It must be ready for occupation by tenants.

Section 4(d)

Where rental income is assessed as s 4(d) investment income.

Derivation of rental income from immovable properties and movable properties.

Movable properties normally involve the lease of plant or machinery.

Advance rental are assessable in the year of receipt, nowwithstanding that it may be subject to refund. Rental income was assessed as income of the basis period in which it was received.

Deduction of expenses

The deduction test for rental income will be revenue expenses that are wholly and exclusively incurred in the production of rental income (s 33), These expenses are:

a. cost of repairs and maintenance of the property (plumbing repairs, replacement of damaged doors / windows)

b. insurance premium on fire / burglary

c. cost of supervision and rental collection

d. cost of obtaining tenant to replace the old tenant

e. interest paid on loan facility taken to finance the property

f. cost of renewing rental agreement and other miscellaneous expenses.

g. quit rent and assessment

h. security service

i. repainting of the rented premises.

Expenses not allowable

Cost of obtaining the first tenant (initial expenses) such as advertising, commision and legal expenses on the first rental agreement is not allowed because these expenses are incurred to create a source of income. It is not inccurred in the production of income.

Where rental income is assessed as a s 4(d) source, capital allowance cannot be claimed as only business source [ s 4(a)] is entiled to capital allowance.