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
Step 1: Determine Total Annual Income
Start by adding up all forms of taxable income:
- Monthly Salary × 12
- Annual bonuses
- Allowances (housing, transport, etc.)
- Commissions
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
Step 2: Deduct EPF Contributions Correctly
While EPF contributions are tax-deductible, there’s a cap:
- 11% Employee EPF Contributions
- Maximum RM4,000 deduction allowed for tax purposes.
Example:
- Monthly EPF: RM5,000 × 11% = RM550
- Annual EPF: RM550 × 12 = RM6,600
- Deductible Amount: RM4,000 only
Step 3: Apply All Relevant Tax Reliefs
Tax reliefs are deductions you can claim to lower your taxable income.
Common Reliefs
| Relief Type |
Amount (RM) |
|---|---|
|
Individual |
9,000 |
|
Spouse (non-working) |
4,000 |
|
Child (per child) |
2,000 |
|
Education fees (Self) |
7,000 |
|
Lifestyle |
2,500 |
Total Relief in Example: RM26,500
Step 4: Calculate Your Chargeable Income
Formula:
- Total Annual Income – Total Reliefs = Chargeable Income
Using our example:
- RM70,000 – RM26,500 = RM43,500
Step 5: Compute Annual Tax Payable Using Progressive Rates
Apply LHDN’s progressive tax rates:
|
Income Range (RM) |
Tax Rate (%) |
|---|---|
|
0 - 5,000 |
0% |
|
5,001 - 20,000 |
1% |
|
20,001 - 35,000 |
3% |
|
35,001 - 50,000 |
6% |
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
Step 6: Subtract Eligible Tax Rebates
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
Thus, no deduction.
Step 7: Determine Your Monthly PCB Deduction
Finally:
- RM1,110 ÷ 12 = RM92.50/month
Common Mistakes to Avoid in PCB Calculations
Mistake 1: Ignoring SOCSO Relief
SOCSO contributions can be deducted during tax filing if Form TP1 is submitted. Otherwise, they’re missed.
Mistake 2: Mixing Up Regular and Additional Remunerations
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
FAQs About PCB Calculation in Malaysia
Yes, all employees earning above the tax threshold must have PCB deducted monthly.
Yes, employees need to submit TP1 annually to claim additional reliefs.
The employee must settle the outstanding amount during income tax filing.
Zakat payments reduce chargeable income or directly offset tax payable.
At least once a year or when there are policy updates.
Absolutely! AutoCount Payroll is always updated for the latest regulations.
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.
Ready to experience effortless payroll management?
👉 Contact AutoCount today and simplify your HR operations.
