PCB Deduction in Malaysia: Calculation, Rates & Employer Guide

In Malaysia, employers must deduct PCB (Potongan Cukai Bulanan) from eligible employees and submit it to LHDN.

Failing to do this on time or miscalculating deductions can result in hefty penalties or even legal consequences.

Many employers struggle with PCB because tax calculations can be confusing.

Who needs to have PCB deducted? How do you calculate it? What happens if you get it wrong?

This article provides a step-by-step breakdown of how PCB deduction works and what employers need to do to stay compliant and avoid penalties.

What is PCB Deduction?

PCB stands for Potongan Cukai Bulanan, which means Monthly Tax Deduction (MTD) in English.

It is a system where employers deduct income tax from employees' salaries every month and submit it to LHDN.

PCB serves as an advance tax payment for employees, preventing them from having to pay a large amount of tax at the end of the year.

This deduction is based on estimated annual income and tax rates, helping employees pay their taxes gradually instead of all at once.

PCB deduction is a legal obligation. Failure to handle it correctly can result in fines or legal action by LHDN.

Who is Required to Deduct PCB?

As an employer, it is important to know which employees are subject to PCB deduction.

PCB must be deducted from employees who meet the following conditions:

Employees earning more than RM34,000 per year after EPF deductions must pay income tax.
For single individuals, the minimum salary for PCB deduction is RM2,851 per month after EPF deduction.
For married individuals with an unemployed spouse, PCB deduction starts at RM3,851 per month after EPF deduction.

Types of Income Subject to PCB Deduction

Not all types of income are taxed under PCB. The table below shows the types of earnings that are subject to PCB and those that are not.

Subjected to PCB	Not Subjected to PCB
Salary/Wages	Zakat
Overtime (OT)	Benefit in Kind (BIK)
Commission	Value of Living Accommodation (VOLA)
Allowance
Bonus
Director Fees
Gratuity, Compensation on Loss of Employment
Tax Paid by Employer, ESOS

Check whether an employee’s earnings are subject to PCB deduction before calculating the tax amount.

Why is PCB Useful?

PCB deduction is beneficial for both employers and employees.

It reduces tax burden by allowing employees to pay their income tax in small amounts every month. This prevents financial stress when tax season arrives.

Deducting PCB correctly also helps businesses to stay compliant with Malaysian tax laws.

It avoids issues where employees may face unexpected tax debts due to underpayment.

PCB Deduction VS Final Income Tax Submission (BE Form)

Some employers think PCB deduction replaces the final income tax filing process, but that is not true.

Employees still need to submit their BE Form during the annual tax filing period.

The table below explains the differences between PCB and final income tax submission.

PCB Deduction	Final Income Tax Submission (BE Form)
Deducted monthly by the employer	Filed annually by the employee
Based on estimated tax amount	Based on total actual income
No adjustments for additional income, tax reliefs, or deductions	Employees can adjust final tax payable based on reliefs and deductions
Employees may still owe additional tax or receive a refund at the end of the year	Determines the final tax amount for the assessment year

Employer’s Responsibility for PCB Deductions

Employers have several important responsibilities when it comes to handling PCB deductions:

Deducting PCB tax from employees’ salaries every month.
Submitting PCB payments to LHDN on time.
Issuing EA Forms to employees by the end of February each year.
Keeping accurate payroll records to track tax deductions.

How to Calculate PCB Deductions

Step 1: Determine the Employee’s Taxable Income

Taxable income includes:

Basic salary
Allowances (e.g., transport, meal, entertainment)
Overtime pay
Bonuses and incentives
Benefits-in-kind (e.g., company car, housing)
Other perquisites

Step 2: Identify Tax Deductions and Reliefs

Employees can claim:

EPF contributions (maximum RM4,000)
SOCSO & EIS contributions
Personal tax reliefs (e.g., spouse, children, medical expenses)

Step 3: Use LHDN's PCB Table or Calculator

Employers can use:

LHDN PCB Schedule – Check the monthly PCB deduction table published by LHDN
PCB Calculator – Use LHDN's online PCB Calculator for accurate computation
Payroll Software – Automate PCB calculation via payroll systems

Step 4: Deduct PCB from Salary & Pay to LHDN

Deduct the calculated PCB from the employee's salary.
Submit payment to LHDN by the 15th of the following month using:
- e-PCB / e-Data PCB
- FPX / online banking
- LHDN counters

Example PCB Calculation

Employee details:

Monthly salary: RM5,000
EPF deduction: RM550 (11%)
Taxable income after EPF: RM4,450
PCB deduction (based on LHDN table): RM50

Thus, RM50 is deducted and paid to LHDN.

Factors That Affect PCB Deduction Amount

Several factors influence how much PCB is deducted from an employee’s salary:

Gross salary (basic salary, allowances, commissions, bonuses).
EPF (KWSP) contributions (PCB is calculated after EPF deduction).
Number of dependents (spouse, children, elderly parents).
Tax reliefs and rebates (education, insurance, medical expenses).

How to Submit PCB to LHDN?

Employers must submit PCB deductions to LHDN through one of the following methods:

Online Submission (Preferred Method)

e-CP39 via MyTax Portal to submit manual entry of PCB data.
e-PCB via LHDN Payroll System for submitting monthly tax deductions.

Manual Submission

Employers can submit PCB via bank counters, post offices, or LHDN payment counters.
The CP39 form must be filled out for manual submission.

Online submission is recommended as it is faster, reduces paperwork, and provides instant confirmation.

Penalties for Employers Who Fail to Deduct and Pay PCB

Failure to deduct and submit PCB on time can lead to serious penalties:

Late Submission Fine: RM200 to RM20,000 or imprisonment for up to six months.
Failure to Deduct PCB: A penalty of 10% on the outstanding PCB amount.
Additional 10% Penalty for late payments.

Employers should track payroll tax payments carefully to avoid penalties and unnecessary costs.

Common Employer Questions About PCB

Do all employees need PCB deductions?

No, not all employees need PCB deductions. PCB is only deducted if an employee’s annual salary exceeds RM34,000 after EPF deductions.

For a single employee, PCB starts when their monthly salary exceeds RM2,851 after EPF deduction.

For a married employee with an unemployed spouse, PCB starts when their monthly salary exceeds RM3,851 after EPF deduction.

If an employee earns below this threshold, PCB is not deducted from their salary.

Can PCB deductions be adjusted?

Yes, PCB deductions can be adjusted if an employee's financial situation changes. Adjustments may happen due to:

A salary increase or decrease.
Changes in EPF contributions.
Additional tax reliefs, such as deductions for dependents, education, or medical expenses.
Changes in spouse employment status.

Employees who believe their PCB deduction is incorrect can submit Form TP1 to their employer, listing eligible deductions for tax relief.

Employers must then recalculate PCB based on the updated information.

What happens if an employee has multiple jobs?

If an employee works for multiple employers, each employer must deduct PCB separately based on the salary they pay.

The employee’s total annual income will be assessed when they file their annual income tax return (BE Form).

If the combined PCB deductions are lower than the actual tax amount due, the employee may need to pay additional tax when filing their tax return.

How can employers ensure compliance with LHDN regulations?

Employers can stay compliant with LHDN regulations by:

Deducting PCB correctly every month based on employee salaries and tax reliefs.
Submitting PCB payments to LHDN before the 15th of the following month.
Using the PCB calculator on MyTax or payroll software to calculate deductions accurately.
Issuing EA Forms to employees by February 28 each year.
Keeping payroll records for at least seven years for audit purposes.

Failing to comply with PCB rules can result in fines ranging from RM200 to RM20,000 or imprisonment for up to six months.

What is the difference between PCB and final income tax?

PCB is a monthly tax deduction made by employers based on estimated annual income, while final income tax is the actual tax amount an employee must pay after all tax reliefs and deductions are considered.

PCB Deduction	Final Income Tax (BE Form Submission)
Deducted monthly from salary	Filed annually by the employee
Based on estimated income	Based on actual income and deductions
No adjustments for extra income or tax reliefs	Employees can claim reliefs, deductions, and rebates
May result in a refund or additional tax due after final tax filing	Determines the final tax payable for the year

Employees must still file their BE Form during the annual tax season, even if PCB has been deducted.

What is PCB deduction in Malaysia?

PCB deduction is a Monthly Tax Deduction (MTD) where employers deduct income tax from employees’ salaries each month and submit it to LHDN.

It is a prepayment of annual income tax, helping employees avoid paying a large tax bill at the end of the year.

PCB applies to employees earning above the minimum taxable salary and is calculated based on gross salary, EPF contributions, dependents, and tax reliefs.

How to calculate the percentage of PCB?

The percentage of PCB deduction depends on an employee’s income, EPF contributions, dependents, and other tax reliefs.

There is no fixed percentage, as PCB is calculated using a progressive tax system.

Employers can calculate PCB using:

The PCB calculator on MyTax (LHDN portal).
The LHDN PCB table (available via e-CP39).
Payroll software, which automatically applies the correct PCB calculation formula.

The basic formula is:

Annual Taxable Income = (Gross Salary – EPF & Tax Reliefs) × 12
Annual Tax = Taxable Income × Progressive Tax Rate
Monthly PCB = (Annual Tax – PCB Already Paid) ÷ Remaining Months in the Year

What is PCB in English?

PCB stands for Potongan Cukai Bulanan, which translates to Monthly Tax Deduction (MTD) in English.

What is the schedule tax deduction in Malaysia?

The schedule tax deduction in Malaysia refers to the PCB deduction schedule, which determines how much tax employers should deduct from employees’ salaries based on their income, dependents, and EPF contributions.

Employers can find the official PCB deduction schedule on the LHDN website or use the e-PCB calculator to compute deductions accurately.

This schedule is designed to help employers calculate tax deductions fairly for employees while complying with LHDN regulations.

Managing payroll taxes can feel overwhelming, but PCB deduction doesn’t have to be complicated.

By using the right tools, staying updated with LHDN guidelines, and following proper submission procedures, employers can handle tax deductions confidently.

Taking the time to calculate and submit PCB correctly protects businesses from penalties and helps employees manage their tax payments easily.

Need to hire new employees? We have 5+ Millions Talents in Malaysia

Start your hiring journey with AJobThing today! Post your job ads, connect with top talents, and streamline your recruitment process with our easy-to-use platform.