PCB (Potongan Cukai Bulanan) in Malaysia: A Complete Guide for Employers

Potongan Cukai Bulanan (PCB), or also known as Monthly Tax Deduction (MTD) is a tax system implemented in Malaysia to ‘simplify’ income tax payments.

Instead of paying a lump sum at the end of the year, taxpayers contribute monthly based on their income, ensuring a smoother financial management process.

Let’s read more of the important things to know about the PCB tax in the article below.

What is PCB or MTD?

PCB or MTD is a mechanism where employers deduct a portion of their employees' salaries each month to remit directly to the Inland Revenue Board of Malaysia (LHDN).

It ensures that employees gradually fulfill their annual tax obligations throughout the year. The purpose of PCB tax is twofold.

First, it helps the government maintain a steady stream of tax revenue throughout the year.

Second, it eases the financial burden on taxpayers by spreading their tax liability across twelve months.

For employees, PCB tax means a portion of their monthly salary is automatically deducted and remitted to the Inland Revenue Board of Malaysia (LHDN).

For employers, it adds an extra layer of responsibility, as they become the intermediaries between their employees and the tax authorities.

Who is Subject to PCB?

All individuals earning an income in Malaysia, either as residents or non-residents, may be subject to PCB deductions if their income meets the taxable threshold.

Employers must assess the eligibility of their employees for PCB and make appropriate deductions.

Exemptions:

Individuals whose annual income falls below the taxable threshold.
Specific allowances and exemptions as per LHDN guidelines.

Key Components in PCB

PCB tables (Potongan Cukai Bulanan tables) are published by LHDN (Lembaga Hasil Dalam Negeri Malaysia) to guide employers on monthly tax deductions.

These tables are updated periodically to reflect changes in income tax rates and reliefs. Below is a simplified list of PCB components commonly included in these tables.

1. Monthly Taxable Income Brackets

PCB tables categorize monthly taxable income into brackets, e.g., RM0–RM3,000, RM3,001–RM5,000, etc. Each bracket specifies the corresponding PCB amount to deduct.

2. Marital Status

Single
Married (with/without working spouse)

3. Number of Children

Tax relief is provided for dependent children based on the number and eligibility.

4. Additional Income or Benefits

Allowances (transport, housing, meal, etc.)
Bonuses or commissions

5. Employee Provident Fund (EPF) Contributions

Deductible amounts (e.g., 11% for most employees) are factored into taxable income calculations.

6. Zakat Payments

Zakat contributions made through payroll reduce PCB deductions.

Where to Access PCB Tables?

The PCB tables are extensive and detailed, covering multiple income levels, deductions, and relief scenarios.

Employers can access the official PCB tables in PDF format or calculate PCB online using LHDN’s e-PCB system or the Payroll System.

Examples of Brackets in PCB Tables (2024 Example)

Taxable Income Range (RM)	Single (PCB)	Married, No Children	Married, 2 Children
0–3,000	0.00	0.00	0.00
3,001–4,000	50.00	30.00	10.00
4,001–5,000	120.00	100.00	80.00
5,001–6,000	250.00	200.00	150.00

How to Use PCB Tables

Determine taxable income (gross income minus EPF and reliefs).
Locate the taxable income range in the PCB table.
Identify the PCB deduction based on marital status and the number of children.

How is PCB Tax Calculated?

Calculating PCB tax is not as straightforward as dividing your annual tax by twelve. It is a more nuanced process that takes into account various factors to ensure accuracy.

Scenario:

Employee Name: Ahmad
Monthly Salary: RM5,000
Marital Status: Married (spouse is working)
Number of Children: 2 (eligible for relief)
EPF Contribution: 11%

Step 1: Determine Gross Monthly Income

Ahmad's gross monthly income includes:

Basic Salary: RM5,000
Allowances (e.g., transport, meal): RM500
Benefits-in-kind (e.g., medical benefits): RM200

Total Gross Income = RM5,000 + RM500 + RM200 = RM5,700

Step 2: Deduct Approved Reliefs and Contributions

The key deductions are typically:

EPF Contribution (11% of basic salary):
- RM5,000 × 11% = RM550
Tax Relief for Children:
- PCB tables provide tax relief per child. For 2 children, Ahmad gets a relief of RM400 per child:
  - RM400 × 2 = RM800

Total Deductions = RM550 (EPF) + RM800 (Children Relief) = RM1,350

Step 3: Calculate Taxable Income

Taxable income = Gross Income - Total Deductions
= RM5,700 - RM1,350
= RM4,350

Step 4: Use PCB Tables

Refer to the LHDN (Inland Revenue Board) PCB tables or use the e-PCB calculator to determine the PCB amount based on:

RM4,350 taxable income
Married status
2 children

From the PCB Table:

PCB deduction = RM120

Step 5: Finalize the Deduction

The employer should deduct RM120 as PCB from Ahmad's monthly salary and remit it to LHDN.

Tax Brackets and Rates

Malaysia employs a progressive tax system, which means the more you earn, the higher your tax rate, with rates ranging from 0% to 30% as of 2024.

The tax brackets start at 0% for the first RM5,000 of annual income and gradually increase.

For income between RM5,001 and RM20,000, the rate is 1%, followed by 3% for income between RM20,001 and RM35,000.

The rates continue to rise, with 6% applied to income between RM35,001 and RM50,000, 11% for income between RM50,001 and RM70,000, and 19% for income between RM70,001 and RM100,000.

Higher earners face rates of 25% for income between RM100,001 and RM250,000, 26% for income between RM250,001 and RM400,000, and 28% for income between RM400,001 and RM2,000,000.

The highest bracket of 30% applies to chargeable income exceeding RM2,000,000.

These rates are applicable to tax residents of Malaysia, while non-residents are generally taxed at a flat rate of 30% on their Malaysian-sourced income.

It is important to note that the tax calculation follows a progressive system, meaning different portions of income are taxed at different rates.

When calculating PCB (Potongan Cukai Bulanan or Monthly Tax Deduction), these progressive rates are applied to the estimated annual income.

However, the actual tax liability might differ from PCB deductions, especially if there are additional income sources or deductions claimed when filing the annual tax return.

The tax rates for middle-income earners have been reduced compared to previous years, reflecting changes in the tax policy to benefit this group of taxpayers.

Deductions and Allowances

When it comes to PCB calculations, deductions and allowances play a crucial role in determining your taxable income. The most common deductions affecting PCB tax include:

EPF Contributions: Employees can deduct up to 11% of their monthly salary for EPF contributions.
SOCSO Contributions: These are deductible and help reduce your taxable income.
Life Insurance Premiums: Premiums paid for life insurance policies are deductible up to a certain limit.
Zakat or Fitrah Payments: These religious contributions can be deducted from your taxable income.

Allowances, on the other hand, can increase your taxable income if they are deemed to be part of your remuneration.

For instance, fixed travel allowances or housing allowances are typically included in PCB calculations. However, reimbursements for work-related expenses are generally not considered taxable income.

It is important to note that while these deductions are factored into your monthly PCB calculations, you might be eligible for additional deductions when filing your annual tax return.

This is why it is crucial to keep track of all your expenses and potential deductions throughout the year.

What Employers Need to Do for PCB Tax?

Employers play a pivotal role in the PCB tax system. Their responsibilities include:

Registering with LHDN: All employers must register with the Inland Revenue Board to participate in the PCB system.
Calculating PCB: Employers are responsible for accurately calculating the PCB amount for each employee based on their salary and other factors.
Deducting PCB: The calculated amount must be deducted from the employee's monthly salary.
Remitting PCB: Employers must remit the deducted PCB to LHDN by the 15th of the following month.
Providing Tax Information: Employers are required to furnish employees with their annual EA form, which details their total income and PCB deductions for the year.

Employers can use the PCB calculator provided by LHDN or integrate PCB calculations into their payroll systems to ensure accuracy.

Compliance and Reporting

Accurate reporting of PCB deductions is not just a legal requirement; it's the backbone of a smooth-running tax system.

Employers must submit a monthly return (Form CP39) to LHDN, detailing the PCB deductions for all employees.

This can be done through various methods:

e-PCB: An online portal for manual submission of monthly tax deductions.
e-Data PCB: A system for submitting PCB data via file upload, ideal for companies with many employees.
e-CP39: A portal for manual submission and one-time submissions.

Employers must ensure that these submissions are made by the 15th of each month.

Failure to comply can result in penalties, including fines and even imprisonment for severe cases of non-compliance.

It is also worth noting that at the end of each year, employers must provide each employee with a statement of remuneration (Form EA), which summarizes the total income paid and PCB deducted throughout the year.

This form is crucial for employees when filing their annual tax returns.

Common FAQs about PCB Tax

Q: What happens if PCB tax is calculated incorrectly?

A: If PCB is under-deducted, the employee may face a higher tax bill when filing their annual return. If over-deducted, the excess will be refunded after the annual tax assessment. Employers may face penalties for consistent errors in PCB calculations.

Q: Can employees adjust PCB deductions based on personal circumstances?

A: Yes, employees can apply for PCB variations if they have additional deductions or reliefs not captured in the standard PCB calculation. This is done through Form PCB/TP1, which must be submitted to LHDN.

Q: How to check PCB tax records and history?

A: Employees can check their PCB history through the LHDN's e-PCB system or by logging into their MyTax account on the LHDN website. It's advisable to regularly review these records to ensure accuracy.

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