Q.
What are the criteria to report the income under s.4 (a) business income and not s.4(d) rental income? What are the advantages and disadvantages?
A.
The key advantage of charging the income under s.4(a) business income is the ability to bring forward expenses into the future year and allowable for deduction from the subsequent year income.
For example, when there is income in current year of RM5,000 with an deductible expense of RM8,000, the excess RM3,000 can be brought forward to be deducted from subsequent year gain if it is under s.4(a) business income. On the other hand, s.4(d) rental income does not allow excess expenses to be carried forward.
Capital allowances are allowed for deduction entirely without limited to the temporary cessation of rental due to repair or maintenance if it is under s.4(a) business income. However, if it is under s.4(d) rental income, capital allowances are not deductible. Therefore, vehicles and big fixtures like machinery (power generator) provided in the premise are not allowable as deduction under s.4(d), but allowable under s.4(a).
Ref:
INCOME FROM LETTING OF REAL PROPERTY
Public Ruling No. 4/2011 Date of Issue: 10 March 2011
Public Ruling No. 4/2011 Date of Issue: 10 March 2011