Bank Deposit Interest and Financial Investment: Tax Treatment

Is deposit interest taxable?

Interest income is generally included in gross income from a Malaysian source (section 4(c) of the Income Tax Act 1967) and is taxable, unless specifically exempted.

However, there is an important exemption for resident individuals: interest from money deposited in certain institutions is exempt from tax.

Exempted interest (resident individuals)

Interest from deposits in the following institutions is exempt from tax for resident individuals:

1. Banks or finance companies licensed / deemed licensed under the Financial Services Act 2013;
2. Banks licensed under the Islamic Financial Services Act 2013;
3. Development financial institutions prescribed under the Development Financial Institutions Act 2002;
4. Lembaga Tabung Haji (Tabung Haji Act 1995);
5. Malaysia Building Society Berhad (Companies Act 2016);
6. Borneo Housing Finance Berhad (Companies Act 2016);
7. Cooperatives registered under the Co-operative Societies Act 1993.

Residency status is decisive

This exemption is specific to resident individuals. If you are a non-resident, the tax treatment of deposit interest may differ — see the tax residency draft for the status criteria.

Scope of this article

This article limits its scope to deposit interest. The treatment of interest from instruments other than deposits (bonds, sukuk, etc.) and dividends is not covered by this list.

Remember

• Keep records of your deposit statements and supporting documents.
• The exemption is for deposit interest; other income (e.g. dividends, rent, salary) is dealt with under separate provisions.
• This article is for general education; for official decisions, refer to HASiL.