Skip to content
Got a notice? Emergency response

Malaysia NRIs · Rental Income Tax

Rental income tax for NRIs in Malaysia

Renting out Indian property from Malaysia means your tenant must deduct tax on the gross rent. Set it up right and reclaim the heavy over-deduction.

When you rent out Indian property while living in Malaysia, the rent is taxed in India. Under the India-Malaysia treaty, income from immovable property is taxable where the property sits, so the rate doesn't drop for living abroad. Because you're a non-resident landlord, your tenant is legally required to deduct tax at source on the rent under Section 393(2) (Section 195 until 31 March 2026), at the 31.2% non-resident rate on the gross rent, not under the lighter resident-landlord rule. That deduction is heavier than your actual tax, because you get a 30% standard deduction when you file, so most of the gap comes back as a refund.
Request a free CA call

India-Malaysia key facts: rental income tax

Default non-resident TDS rate31.2%
What the treaty changes hereIt sets no lower rate on this income. What a treaty decides here is which country gets to tax it.
Treaty article / basisIndian rental taxed in India only; received in Malaysia falls under FSI exemption till 2036
Your TRC issuing authorityLHDN (Inland Revenue Board)

Rates reflect India's domestic withholding under Section 393(2) (Section 195 until 31 March 2026) and the India-Malaysia treaty. Surcharge applies on top; the 4% cess is already included in this figure.

How it works on the India side

A tenant paying rent to an NRI landlord must deduct TDS under Section 393(2) (Section 195 until 31 March 2026), the provision for any payment to a non-resident, which means the tenant has to take a TAN, deduct each month on the gross rent, deposit it, file a quarterly Form 144 (the old Form 27Q) against your PAN, and issue you a TDS certificate. The common, costly mistake is the tenant using Section 194-IB, the 2% resident-landlord rule, which doesn't apply to a non-resident landlord and leaves both sides exposed.

The deduction on gross rent is more than you actually owe, because your taxable rental income is much smaller: a flat 30% standard deduction comes off under Section 24(a), and home-loan interest comes off too. When you file your return, the TDS the tenant deposited is set against your real liability and the excess is refunded, but only if the tenant's quarterly statement correctly reports it against your PAN, which is why setting the tenant up right from the start matters. If you'd rather not wait a year for that refund, a lower-deduction certificate on Form 128 under Section 395 (the old Form 13 under Section 197) can cut the monthly deduction at source instead.

What changes because you live in Malaysia

Malaysia won't tax this a second time. As a resident individual you're exempt on foreign income you bring into Malaysia, and P.U.(A) 451/2024 pushed that exemption from the end of 2026 out to 31 December 2036. The condition is that the income was taxed where it arose, and the Indian tax deducted at source satisfies it. LHDN also accepts the test as met where India charged nothing because the income sat below a threshold, and foreign capital gains sit outside the Malaysian net for individuals anyway. Then comes the trap. Your Malaysian tax on all of this is nil, and Schedule 7 caps any foreign tax credit at the Malaysian tax on that same income. So Indian tax on your interest, dividends, rent, equity gains and property gains earns you nothing back in Malaysia. Keep every Indian deduction certificate, because LHDN can ask you to prove the income was taxed in India.

Frequently asked questions

Common questions from Malaysian NRIs

Under Section 393(2), the successor to Section 195, because you're a non-resident landlord. The tenant has to take a TAN, deduct on the gross rent at the 31.2% non-resident rate, deposit it, file a quarterly Form 144 (the old Form 27Q) against your PAN and give you the TDS certificate. Section 194-IB, the 2% rule most tenants know (it was 5% until 1 October 2024), applies only to resident landlords and is the wrong provision for a non-resident.

Yes. The deduction is on the gross rent, but your taxable rental income is much smaller, because you get a flat 30% standard deduction under Section 24(a) plus any home-loan interest before tax is computed. The over-deducted amount comes back as a refund when you file your Indian return, provided the tenant's quarterly statement correctly reports the TDS against your PAN. Malaysian NRIs who don't want to wait for that refund apply for a Form 128 certificate instead.

No. Income from immovable property is taxable where the property sits, so Indian rent stays taxable in India regardless of where you live. The rent normally isn't charged in Malaysia, so India's tax is all you pay on it. The note below carries any exception. The treaty stops double taxation. The saving comes from the 30% standard deduction and reclaiming the over-deducted TDS, not from a lower treaty rate.

Go further

Read the full guide, or see your country's complete picture

NRI landlord: setting your tenant up for Section 195 TDSMalaysia NRI tax guide: every income type and the rates that apply

Rental Income Tax sorted, by an Indian CA who works with Malaysian NRIs

Tell us your situation and a practising Chartered Accountant will confirm the rate that applies, the paperwork you need, and what you can reclaim, on a free call with no obligation.

Request a free CA call

No card, no obligation. All filing work is handled by ICAI-registered practising Chartered Accountants.