Malaysia PCB Calculation Made Easy: A Step-by-Step Payroll Guide (2025 Update)

Introduction to PCB (Potongan Cukai Bulanan)

What is PCB and Why It Matters?

Potongan Cukai Bulanan (PCB) – or Monthly Tax Deduction (MTD) – is an essential part of Malaysia’s income tax system. Rather than paying a hefty lump sum at year-end, PCB helps employees contribute smaller amounts monthly. It smooths cash flow and ensures that most taxpayers won’t face large bills or hefty penalties when filing their annual tax returns.

The Role of LHDN in PCB Compliance

The Inland Revenue Board of Malaysia (LHDN) governs and monitors the PCB system. Employers are legally obligated to calculate and deduct the correct PCB from employees’ salaries, and failing to comply can result in significant penalties.

Step-by-Step PCB Calculation Process

1. Start by adding up all forms of taxable income:

  • Monthly Salary × 12
  • Annual bonuses
  • Allowances (housing, transport, etc.)
  • Commissions

2. Example:

  • If your monthly salary is RM5,000 and you receive a RM10,000 bonus, your total annual income would be: (RM5,000 × 12) + RM10,000 = RM70,000

1. While EPF contributions are tax-deductible, there’s a cap:

  • 11% Employee EPF Contributions
  • Maximum RM4,000 deduction allowed for tax purposes.

2. Example:

  • Monthly EPF: RM5,000 × 11% = RM550
  • Annual EPF: RM550 × 12 = RM6,600
  • Deductible Amount: RM4,000 only

1.Tax reliefs are deductions you can claim to lower your taxable income.

2. Common Reliefs:

  • Total Relief in Example: RM26,500

1.Formula: Total Annual Income – Total Reliefs = Chargeable Income

2.Using our example: RM70,000 – RM26,500 = RM43,500

1. Apply LHDN’s progressive tax rates

2. Thus:

  • 0% on first RM5,000
  • 1% on next RM15,000 = RM150
  • 3% on next RM15,000 = RM450
  • 6% on remaining RM8,500 = RM510

Total Tax Payable: RM1,110

1. Some rebates (like individual rebate or zakat payments) could further reduce your tax payable. In this case:

  • Chargeable Income > RM35,000 → No rebate
  • Zakat paid = RM0

2. Thus, no deduction.

1. Finally: RM1,110 ÷ 12 = RM92.50/month

Common Mistakes to Avoid in PCB Calculations

  • SOCSO contributions can be deducted during tax filing if Form TP1 is submitted. Otherwise, they’re missed.
  • Bonuses and special payments must be separated from the regular salary when calculating PCB to ensure compliance.

PCB Calculation Example (with Real Numbers)

Assume:

  • Salary: RM5,000
  • Bonus: RM10,000
  • Spouse: Non-working
  • Two Children: Under 18
  • EPF Contributions: Standard 11%

Following the steps above, the monthly PCB will be RM92.50.

Tools to Make PCB Calculation Simpler

Construction Contracts under P.U. (A) 276/2007

  • LHDN PCB Calculator
  • PayrollPanda PCB Guide
  • AutoCount Payroll System

AutoCount Payroll even auto-updates new tax rates every year for hassle-free compliance!

How AutoCount Payroll Can Help You

  • Automated Calculations: PCB, EPF, SOCSO, and EIS deductions
  • Regulatory Compliance: Always aligned with LHDN’s latest rules
  • User-Friendly Dashboard: Manage payroll in just a few clicks
  • Accurate Reporting: Generate payslips and EA forms easily

Conclusion

Master PCB and Simplify Your Payroll Today

Managing PCB isn’t just about compliance – it’s about supporting your employees’ financial health. With clear calculations and the right tools like AutoCount Payroll, employers can avoid penalties, boost employee trust, and streamline their HR processes.

Need Professional Payroll Management Solutions?

Our certified payroll specialists ensure accurate, compliant, and efficient payroll processing, allowing you to focus on strategic business priorities.

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