One common question among employees and employers in Malaysia is whether PCB (Potongan Cukai Bulanan) is mandatory.
The short answer is: Yes — PCB deduction is compulsory in most employment situations under Malaysian tax law.
This article explains what PCB is, when it applies, and why it cannot simply be skipped.
What is PCB?
PCB (Potongan Cukai Bulanan) is the Monthly Tax Deduction system in Malaysia.
It is a mechanism where employers deduct income tax from an employee’s monthly salary and remit it to Lembaga Hasil Dalam Negeri Malaysia (LHDN).
Instead of paying a large lump sum at the end of the year, tax is collected gradually throughout the year.
Is PCB Mandatory?
✅ Yes — PCB is compulsory
PCB is legally required under Malaysian tax regulations for employees who meet taxable income criteria.
Employers are obligated to:
- Calculate monthly tax based on employee income
- Deduct PCB from salary
- Remit the amount to LHDN on a monthly basis
Employees cannot opt out
Once an employee:
- Earns taxable income, and
- Is under an employment contract
PCB deduction becomes automatic and cannot be waived by request.
Who is subject to PCB?
PCB applies to:
- Full-time employees
- Part-time employees (if taxable income applies)
- Directors receiving remuneration
- Commission-based employees (depending on structure)
It does not apply if:
- Income is below taxable threshold
- No employment relationship exists
Why PCB is required
PCB ensures:
- Tax is collected gradually throughout the year
- Employees avoid large tax payments during filing season
- LHDN receives steady tax revenue flow
- Better compliance and reduced tax evasion
How PCB is calculated
PCB is based on:
- Monthly salary
- EPF contribution
- Tax relief claims (if declared through EA form)
- Marital status and number of children
Employers usually calculate PCB using:
- LHDN PCB calculator or
- Payroll systems integrated with tax tables
What happens if PCB is not deducted?
If an employer fails to deduct PCB:
- Employer may be liable for penalties and unpaid tax
- LHDN can recover unpaid tax from employer
- Employee may face lump sum tax payable during filing
This is why most companies strictly comply with PCB requirements.
Can PCB be adjusted?
Yes. PCB is not fixed permanently.
It can be adjusted if:
- Employee income changes (salary increase/bonus)
- Tax relief updates are submitted
- Employment status changes
Employees can also submit Form TP1/TP3 to adjust deductions during the year.
PCB is not optional — it is a mandatory tax deduction system in Malaysia designed to ensure smooth and consistent tax collection.