Understanding Malaysia’s Monthly Tax Deduction System
If you’re working in Malaysia, you’ve probably seen the term “PCB” on your payslip. But what exactly does it mean?
PCB stands for Potongan Cukai Bulanan, or Monthly Tax Deduction (MTD). It’s a system implemented by Lembaga Hasil Dalam Negeri (LHDN) Malaysia’s Inland Revenue Board to help taxpayers pay their income tax in manageable monthly installments.
What Is PCB?
PCB (Potongan Cukai Bulanan) is a mandatory monthly tax deduction from your salary made by your employer. Instead of paying one lump sum of income tax at the end of the year, PCB allows you to “pre-pay” your taxes bit by bit throughout the year.
Who Needs to Pay PCB?
PCB applies to:
- Employees who earn a taxable income
- Both Malaysian residents and foreigners working in Malaysia
- Employers are legally required to deduct and remit PCB to LHDN
Even if you’re earning below the chargeable income threshold, your employer might still deduct PCB based on estimated tax obligations (which can be refunded later if overpaid).
How Is PCB Calculated?
PCB is calculated based on:
- Gross monthly salary
- Marital status
- Number of children
- Approved tax reliefs & deductions
- EPF and SOCSO contributions
LHDN provides an online PCB calculator and an MTD/PCB Schedule to help employers calculate the correct amount.
Note: The PCB deducted might not be your final tax liability. You may still need to file a tax return and pay any shortfall (or receive a refund).
Does PCB Mean You Don’t Have to File Income Tax?
No. PCB is just an advance tax payment. You still need to file your income tax return (Form BE or EA) annually, typically between March and April.
Why?
- You might be eligible for additional tax reliefs (e.g. education, lifestyle, insurance)
- You might have additional income (freelance work, rental, dividends)
- You might be over-taxed or under-taxed via PCB
✅ Filing lets you claim a refund if your total PCB is more than your actual tax liability.
Why PCB Matters for Employers
As an employer, you must:
- Register your employees with LHDN
- Deduct PCB based on the latest PCB schedule
- Remit it to LHDN by the 15th of the following month
- Provide employees with Form EA by the end of February for tax filing
⚠️ Penalties apply for late or incorrect deductions!
Common Misconceptions
Misconception | Reality |
PCB is voluntary | ❌ It’s mandatory under the Income Tax Act 1967 |
PCB means I don’t need to file taxes | ❌ You still need to file to verify total tax liability |
PCB is calculated the same for everyone | ❌ It varies based on salary, status, and reliefs |