How PCB Tax Works in Malaysia — Monthly Tax Deduction Explained

What Is PCB?

PCB stands for Potongan Cukai Berjadual — literally “Scheduled Tax Deduction.” It is also known as MTD (Monthly Tax Deduction). It is not a separate tax — it is income tax, collected monthly by your employer on behalf of LHDN rather than as an annual lump sum.

Think of PCB as an instalment plan: LHDN estimates what you owe for the year and collects it in 12 equal monthly slices. The key word is estimate — the actual liability is settled when you file your annual Borang BE return.

The PCB Calculation Method

LHDN uses the computerised PCB formula (also called the Kalkulator PCB or CP38A method). The employer’s payroll software performs this each month. Here is the logic:

1. Annualise your income: Projected annual taxable income = (Total remuneration received so far this year + remaining monthly salary × remaining months). Bonuses and allowances are factored in when paid.
2. Deduct EPF contributions: Employee EPF (11% of gross) is deducted from the annualised amount. Other deductions declared via TP1 are also subtracted.
3. Apply progressive tax rates: LHDN’s YA 2024 brackets are applied to the chargeable income to get estimated annual tax.
4. Apply rebates: Personal rebate (RM400 for chargeable income ≤RM35,000), and Zakat if declared.
5. Divide by remaining months: Annual tax estimate − tax already paid this year = remaining tax. Divide by remaining months in the year to get this month’s PCB.

This is why PCB can change month to month even if your base salary stays the same — receiving a bonus in August, for example, will raise PCB for the remaining months of the year as it updates the annual income estimate.

What Factors Affect Your PCB Amount

• Gross monthly salary: The primary driver. Higher salary → higher PCB.
• Bonuses and commissions: One-off payments raise the annual income estimate and can significantly spike PCB for several months.
• Marital status: Single, married (spouse working), or married (spouse not working) yield different PCB amounts. Updating your employer when you marry or have a child reduces PCB.
• Number of children: Each qualifying child reduces PCB. Declaring children via TP1 ensures this is reflected monthly.
• Residency: Non-residents pay a flat 30% on all income — no progressive rates, no reliefs.
• TP1 declarations: Insurance premiums, education fees, and other declared reliefs reduce the chargeable income estimate.
• Zakat: Paid Zakat is a direct 1-for-1 rebate — each ringgit of Zakat paid reduces your PCB by exactly RM1 (not just a chargeable income reduction).

TP1 — How to Reduce PCB Monthly

The TP1 form (also referenced as CP34A) is a declaration you submit to your employer — not to LHDN — informing them of your personal tax reliefs so PCB can be adjusted downward. Without a TP1, your employer assumes you have no reliefs beyond the standard personal exemption.

Common reliefs to declare via TP1:

• Life insurance and takaful premiums (up to RM3,000)
• Medical insurance premiums (up to RM3,000, shared with life insurance to RM7,000 total)
• Spouse relief (RM4,000 if spouse has no or minimal income)
• Children under 18 (RM2,000 each) or children in higher education (RM8,000 each)
• Disability reliefs (if applicable)

Your employer applies the TP1 to reduce your monthly PCB. You should update TP1 whenever your circumstances change (new child, new insurance policy, etc.). There is no penalty for updating TP1 — your employer is required to honour it.

CP38 — When LHDN Asks for More

If LHDN determines you underpaid tax in a prior year — either from missed PCB, additional income not accounted for, or errors in a past return — they can issue a CP38 notice to your employer. This instructs the employer to deduct an additional monthly amount on top of your regular PCB until the outstanding amount is recovered. CP38 is separate from the regular PCB schedule and will show as a separate line on your payslip.

How Employers Remit PCB to LHDN

Employers must remit all PCB collected from employees to LHDN by the 15th of the following month. They file a CP39 return listing all employees and PCB amounts. At year-end, each employee receives an EA Form (by 28 February) showing total remuneration and total PCB deducted for the year — this is used to file your personal tax return.

Related Guides

• PCB vs Income Tax Malaysia — What’s the Difference?
• How to Reduce Income Tax Legally in Malaysia
• Malaysian Salary Deductions Explained
• PCB Calculator Malaysia