Last updated: 11 October 2026 · Rates checked against: PwC Worldwide Tax Summaries — Malaysia, reflecting Schedule 6, Income Tax Act 1967
Reviewed by Zia Shahid, Buzdy Banking Editor · Our methodology
In this guide
This is one of the shortest answers in the region, and it surprises people who have moved to Malaysia from a country where savings are taxed.
Interest paid to an individual by a licensed bank in Malaysia is exempt from income tax.
There is no cap on the exempt amount, and no need to declare it in your LHDN e-Filing return.
The exemption sits in Schedule 6 of the Income Tax Act 1967 and applies to money deposited with approved institutions — which includes all licensed banks and financial institutions.
What counts as an approved institution
PwC's summary of the Malaysian rules puts it plainly: "Interest received by individuals on money deposited in approved institutions, which include all licensed banks and financial institutions, is tax exempt."
In practice that covers the fixed deposit, savings and current accounts offered by banks licensed under the Financial Services Act 2013 and Islamic banks licensed under the Islamic Financial Services Act 2013.
Does the tenure matter?
No. Unlike several countries in the region, Malaysia does not tax short-tenure deposits differently from long ones, and does not withdraw the exemption above a certain amount.
Where the exemption stops
The exemption is about money deposited with a licensed institution. It is not a general exemption for every kind of interest. Interest from lending to a person or a company, or from an institution that is not licensed in Malaysia, is a different matter and should be checked with a tax agent.
Frequently asked questions
Do I declare FD interest in e-Filing?
No. Exempt interest from a licensed bank does not go in the return.
Is there a limit above which it becomes taxable?
The exemption as described carries no cap on the amount of interest.
Does this apply to Islamic deposits?
The exemption is about deposits with approved, licensed institutions. Islamic banks licensed under the Islamic Financial Services Act 2013 are licensed institutions.
I am not a Malaysian citizen. Does it still apply?
The exemption is written around the deposit and the institution rather than nationality, but residency can affect other parts of your tax position. Check with a tax agent for your own case.
Sources
- PwC Worldwide Tax Summaries — Malaysia, income determination
- Lembaga Hasil Dalam Negeri Malaysia (LHDN)
This is information, not tax advice. The figures above were checked against the source named at the top of this page on 11 October 2026. Tax rules change, usually with each annual budget. For a decision about your own money, speak to a qualified tax adviser in your country.
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