If you work in Malaysia or handle payroll, you’ve heard about PCB — but what does it mean, and why does PCB Deduction show up on every payslip?
Let’s explain it — without tax jargon or guesswork.
What Does PCB Deduction Mean in Malaysia?
PCB means “Potongan Cukai Bulanan,” which translates to Monthly Tax Deduction. It’s part of Malaysia’s income tax system, managed by LHDN (Lembaga Hasil Dalam Negeri) — the Inland Revenue Board.
Here’s the crucial point: PCB isn’t a separate tax. It’s an advance payment of your yearly income tax taken out of your paycheck each month. You can think of it as paying your tax in instalments, so you don’t face a huge bill when the year ends.
Why Does Your Salary Have PCB Deduction?
PCB exists to help people with salaries pay income tax more manageably. Instead of waiting to pay everything at year’s end, PCB splits the cost over 12 months.
Most employees in Malaysia who earn above the tax threshold (RM34,000 after EPF deduction, according to current LHDN rules) must pay PCB.
The employer deducts this amount each month and sends it to LHDN on your behalf.
Does PCB Count as Your Final Tax?
Not always. PCB serves as an advance payment. You still need to submit your income tax return (Form BE) at year’s end.
- If you’ve paid too much PCB, you’ll get a refund
- If you’ve paid too little, you’ll need to pay more.
So yes, you must file taxes even when you see PCB deductions on your monthly payslip.
How Do They Calculate PCB?
LHDN gives full PCB schedules and formulas. Here’s a simple breakdown of what goes into the calculation:
| Factor | Description |
| Gross Salary | Monthly basic salary + allowances + bonuses |
| EPF Contribution | Statutory deduction reduces taxable income |
| Marital Status | Spouse working or non-working affects rates |
| Number of Children | More dependents = more tax reliefs |
| Tax Rebates/Reliefs | For lifestyle, parents, education, etc. |
Bonus Tip: When your company pays out variable income like performance bonuses or prorated bonuses, these are also part of PCB calculations.
| Check Out Our Blog Posts To Get More Info On How Bonuses Impact PCB: Understanding Performance Bonuses and Prorated Bonuses |
Basic PCB Deduction Scenario
Let’s assume:
- Your monthly salary: RM5,000
- EPF (Employee portion): RM550
- Net taxable income = RM4,450
If you’re single without dependents, your estimated PCB deduction might range from RM100 to RM200 per month, based on other allowances and benefits you receive.
Remember: The precise PCB calculation depends on LHDN’s official PCB table or online calculator. Companies that use systems like Info-Tech’s HR & Payroll Software get PCB calculations done — no spreadsheets, no mistakes.
Who Has to Deduct PCB?
In Malaysia, employers have a legal duty to:
- Calculate PCB monthly for every taxable employee
- Deduct it correctly from payroll
- Submit it to LHDN by the 15th of every month
Not doing this can result in penalties or audits. So, if you run a business, check that your payroll system handles PCB rules without issues.
Which Income Types Are Subject to PCB?
PCB applies to all employment income forms, including:
- Basic salary
- Commissions
- Overtime
- Bonuses (yes even those holiday ones)
- Allowances (e.g. travel, housing, shift)
PCB deduction applies to contract employees too as long as their income goes over the PCB threshold.
Does PCB Apply to Bonuses?
Yes, it does. Many employers believe bonuses fall outside the monthly deduction scope.
- LHDN says bonuses need to be part of PCB calculations for the month when the bonus gets paid.
So, if you’re giving out RM6,000 as a year-end bonus, and the employee’s monthly pay is RM4,000 — their PCB will be calculated based on RM10,000 for that month.
Need help to handle this and without mistakes? Check out our bonus guide: How To Calculate Prorated Bonus: A Simple Guide For Malaysian Employers
Can Employees Lower Their PCB?
Yes! You can cut down your monthly PCB by bringing your tax profile up to date with LHDN through the e-PCB or e-CP39 portal.
Here’s what to do:
- Declare your spouse’s income status
- Report number of children/dependents
- Include personal tax reliefs (e.g. lifestyle, insurance, education)
If you skip these details, LHDN thinks you have no dependents and no tax reliefs — which could lead to you paying too much.
Common Mistakes Companies Make with PCB
Let’s be real: taxes are tricky, and PCB is no different. Here are mistakes we often see:
| Mistake | Impact |
| Not deducting PCB from contract staff | Non-compliance, legal trouble |
| Miscalculating variable income | Under or overpaid taxes |
| Missing the 15th of the month deadline | Fines and penalties |
| Manual calculations in Excel | High error rate, no audit trail |
| Not syncing bonus payments with PCB | Unexpected tax bills |
Pro Tip : Info-Tech’s Payroll Software handles PCB, follows LHDN rules, and combines tax calculations with pay slips, bonus payments, and more.
Conclusion:
PCB isn’t just a number on your pay slip — it’s your monthly pass to staying compliant with LHDN and avoiding huge tax bills at year’s end.
HR managers, business owners, and employees can benefit from knowing how PCB operates. This knowledge helps lower stress, boost payroll precision, and enable better financial management.
With the right tools like Info-Tech’s HR & Accounting Software your work has become all the more easier,
Contact us for a FREE Demo!!