Tax guide for Indian owners
How India and Malaysia tax your Malaysian property
A Malaysian property owned by a resident Indian is taxed in two places. Malaysia taxes the rent and the gain on sale first, India taxes the same income again for residents, and the India–Malaysia tax treaty decides how the overlap is relieved. This page sets out the rules as they stand in October 2026.
In short
Key points
- Malaysia taxes rent earned by non-resident individuals at a flat 30% of taxable income, with no personal reliefs.
- Resident and ordinarily resident Indians also pay Indian tax on that rent, with credit for the Malaysian tax, claimed on Form 67 (FY 2025-26) or Form 44 (from tax year 2026-27).
- On a sale, Malaysia charges real property gains tax of 30% for non-citizens in the first five years and 10% from the sixth year.
- In India the property is long-term after 24 months and the gain is taxed at 12.5% without indexation; RPGT is not listed among the taxes covered by the treaty, so credit for it needs care.
- Report the property in Schedule FA every year while you are resident and ordinarily resident, whether or not it earns anything.
At a glance
Two countries, one property
Who taxes what depends on the event and on your Indian residential status.
| Event | Malaysia | India: resident and ordinarily resident | India: NRI or RNOR |
|---|---|---|---|
| Holding, no income | Annual quit rent and assessment (local authority charges) | Report in Schedule FA every year | Nothing to report |
| Rent | 30% of taxable income for non-residents | Taxable, with credit for Malaysian tax | Generally not taxed in India |
| Sale | RPGT 30% (years 1–5) or 10% (year 6 onwards); buyer retains 7% of the price | Capital gains tax; credit position for RPGT needs advice | Generally not taxed in India |
Sources: LHDN, Income Tax Department and treaty text as listed under Sources; seen October 2026.
Rental income
Rent is taxed first in Malaysia
Malaysia taxes income from property situated in Malaysia regardless of where the owner lives. An owner who is not resident in Malaysia for tax purposes (broadly, in the country for fewer than 182 days in the year) is taxed at a flat 30% of taxable income and cannot claim personal reliefs. LHDN has applied this rate since year of assessment 2020.
Taxable income is the rent after allowable expenses. Which expenses qualify (for example quit rent, assessment, maintenance charges, loan interest) follows Malaysian rules, so keep receipts. Non-resident individuals file the Form M return. Malaysia’s tax year is the calendar year, which matters when you come to claim credit in India.
If you plan to let the unit, see renting out property in Johor and test the numbers in the rental yield calculator using the rent after Malaysian tax.
Rental income
Rent in India: taxed for residents, with foreign tax credit
Resident and ordinarily resident taxpayers are taxed in India on worldwide income, so Malaysian rent goes into the Indian return as well.
- Computation: the rent is income from house property. Municipal taxes actually paid are deducted, then a standard deduction of 30% of the annual value; interest on a loan for a let-out property is also deductible, subject to limits on setting off a loss.
- Credit: India allows a credit for the Malaysian tax paid on that income, limited to the Indian tax on the same income. You cannot use Malaysian tax to reduce Indian tax on other income.
- Form: for FY 2025-26 (AY 2026-27) the claim is made on Form 67 under the old rules, filed before or with the return. From tax year 2026-27, under the Income-tax Rules, 2026, Form 44 replaces it and is due within twelve months of the end of the tax year, provided the return is filed on time.
- Schedules: the income goes in Schedule FSI (foreign source income) and the credit in Schedule TR (tax relief).
- Different years: Malaysia taxes January to December, India April to March, so Malaysian tax has to be apportioned between Indian years. Keep the Malaysian assessment and payment receipts.
NRIs and RNORs are generally outside this: India does not tax their foreign rent. See buying Malaysian property from India for how residential status affects the purchase itself.
The treaty
What the India–Malaysia DTAA says
The current agreement was signed on 9 May 2012, came into force on 26 December 2012 and applies in India from 1 April 2013 (Notification 7/2013).
Article 6: income from immovable property
Income a resident of one country earns from immovable property in the other country may be taxed in the country where the property is. Malaysia therefore taxes rent from a Malaysian home owned by an Indian resident.
Article 14: capital gains
Gains from selling immovable property may be taxed in the country where the property is situated. Malaysia keeps the right to tax the sale.
Article 24: elimination of double taxation
Where an Indian resident’s income may be taxed in Malaysia under the treaty, India deducts the Malaysian tax from the Indian tax on that income, up to the Indian tax attributable to it.
Article 2: taxes covered
On the Malaysian side the treaty lists income tax and petroleum income tax. Real property gains tax is not listed.
“May be taxed” gives the property country the first right to tax; it does not take India’s right away for its residents. That is why resident owners report the income in India and claim credit rather than leaving it out.
Selling
Malaysian RPGT for non-citizens
Real property gains tax is charged on the gain when Malaysian property is sold. Foreign owners fall under Part III of the Fifth Schedule.
| Disposal within | Non-citizen, non-PR individual | Malaysian citizen (for comparison) |
|---|---|---|
| First three years | 30% | 30% |
| Fourth year | 30% | 20% |
| Fifth year | 30% | 15% |
| Sixth year and after | 10% | Nil |
Source: LHDN (hasil.gov.my), RPGT rates; non-citizen rates effective 1 January 2019, citizen rates 1 January 2022; seen October 2026.
When a non-citizen sells, the buyer must retain 7% of the price and pay it to LHDN within 60 days of the disposal, against the seller’s final RPGT bill. If the gain is small, the seller recovers the excess once the RPGT is assessed. For the selling process, see selling property in Johor.
Selling
Indian capital gains on foreign property after July 2024
- Holding period: land and buildings held for more than 24 months are long-term.
- Long-term rate: 12.5% without indexation for transfers on or after 23 July 2024, plus surcharge and cess.
- Grandfathering: resident individuals and HUFs selling land or buildings acquired before 23 July 2024 can choose 20% with indexation if that gives less tax. The Income Tax Department’s guidance does not limit this to property in India; confirm with your CA.
- Short-term: gains on property held 24 months or less are added to income and taxed at your slab rate.
- Currency: the gain is worked out in rupees, so a ringgit gain can be larger or smaller in India once exchange rates at purchase and sale are applied.
The credit for RPGT is the hard part. Because RPGT is not among the Malaysian taxes covered by the treaty, whether and how India gives credit for it is not straightforward. Get advice before you sell, especially in the first five years when RPGT is 30%.
Every year
Schedule FA, FSI and TR: what to file
- Schedule FA: resident and ordinarily resident owners report the property in the immovable-property table every year, on a calendar-year basis (1 January to 31 December), even if it earns nothing. NRIs and RNORs do not file it.
- Schedule FSI: Malaysian rent and any capital gain, country by country.
- Schedule TR: the credit claimed for Malaysian tax, backed by Form 67 or Form 44.
- Penalty: failing to report a foreign asset can attract a ₹10 lakh penalty under the Black Money Act. The relief for small foreign assets (up to ₹20 lakh in total, from 1 October 2024) and the 2026 Budget’s prosecution relief both exclude immovable property.
If the property was bought with money sent under LRS, the records you kept at the time (Form A2, bank advices, TCS certificates) are the starting point for these schedules. For succession planning, see a will for Malaysian property.
Straight answers
Frequently asked questions
Is rental income from Malaysian property taxable in India?
Yes, for residents and ordinarily residents of India, who are taxed on worldwide income. India gives credit for the Malaysian tax paid on that rent, up to the Indian tax on it. NRIs and RNORs are generally not taxed in India on it.
What tax does Malaysia charge on rent paid to a foreign owner?
A non-resident individual pays a flat 30% on taxable rental income, after allowable expenses, and cannot claim personal reliefs. The owner files the non-resident Form M return.
Which form do I use to claim foreign tax credit in India?
For FY 2025-26 (AY 2026-27), Form 67. From tax year 2026-27, under the Income-tax Rules, 2026, Form 44 replaces it and is due within twelve months of the end of the tax year if the return is filed on time.
How much RPGT does a foreigner pay when selling in Malaysia?
30% of the gain if sold within five years and 10% from the sixth year. The buyer retains 7% of the price and pays it to LHDN within 60 days.
Does the India–Malaysia DTAA prevent double tax on property?
It gives Malaysia the right to tax rent and gains from Malaysian property, and India gives credit for Malaysian tax covered by the treaty. Real property gains tax is not listed among the covered taxes, so ask your CA about credit for it.
How is capital gain on foreign property taxed in India after July 2024?
Property held over 24 months is long-term and taxed at 12.5% without indexation. Resident individuals with land or buildings acquired before 23 July 2024 can choose 20% with indexation if lower.
Do I have to declare a Malaysian property with no rental income?
Yes. Resident and ordinarily resident taxpayers must report it in Schedule FA every year. The penalty for leaving it out can be ₹10 lakh, and the small-asset relief does not cover immovable property.
Planning a purchase from India?
Send me your budget, the city you are looking at and whether you will live in it or rent it out. I will explain the rules that apply and which units qualify.