Estimation of total water balance is a substantial issue for watershed modelling in order to simulate the major components of the hydrological cycle to determine the stress of different anthropogenic activities on the available water resources within a catchment. In this context, the fully distributed physically based MIKE SHE modelling system was used to simulate the individual hydrological components of the total water balance for the Paya Indah Wetlands (PIW) watershed in the west of Peninsular Malaysia. Results reveal that the overall water balance is predominantly controlled by climate variables. Application of the model to the PIW watershed provides detailed estimation of the total water balance for a first‐order catchment in which actual evapotranspiration (ET) represents approximately 65 and 58%, while overland flow (OL) to the PIW lake system represents 12.38 and 12.3% of the total rainfall during the calibration and validation periods, respectively. The difference of the inflow and outflow was taken as storage in depth. Overall, the model gives a reasonable output of total error of less than 1% of the total rainfall, which in turn indicates that the interaction among components is satisfactorily sustained.
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