PCB Malaysia: How Monthly Tax Deduction Is Calculated (Step-by-Step Guide)
Learn exactly how PCB (Monthly Tax Deduction) is calculated in Malaysia using the SCHEDULE formula. Step-by-step walkthrough with real salary examples, the difference between PCB for regular salary and bonus, and how to verify your employer is deducting the correct amount.
Every month, if you are a private-sector employee in Malaysia earning above RM3,000 (or above RM2,119 after EPF deduction), your employer withholds a portion of your salary as PCB. The employer sends that money to LHDN on your behalf. At year-end, you file your tax return, calculate your actual tax liability, and either get a refund (if PCB was too high) or pay the balance (if too low).
What most people do not know: PCB is not a flat percentage of your salary. It is calculated using a formula from the SCHEDULE of Monthly Tax Deductions published by LHDN, and that formula involves progressive rates, the chargeable income band your salary falls into, and a cumulative running calculation from January to December.
This guide walks through the exact formula, step by step, using real Malaysian salary examples. If you have ever looked at your payslip and wondered why your PCB went up in November despite your salary staying the same, this explains it.
Use the DuitTools PCB calculator to check your monthly PCB instantly — enter your gross salary, EPF contribution rate, and see the exact deduction for any month of the year.
Who Is Required to Pay PCB?
PCB applies to employees who meet all three conditions:
- Earning employment income in Malaysia
- Taxable income exceeds the personal relief threshold (RM9,000 for individuals under the current regime)
- Monthly net remuneration after mandatory EPF deduction is above RM2,119
If you earn RM2,000 gross per month, your annual income is RM24,000. After EPF (RM2,200) and personal relief (RM9,000), your chargeable income is RM12,800. The tax on RM12,800 is low — your PCB may be zero or minimal.
The RM2,119 monthly threshold (after EPF) is the point at which PCB kicks in for most employees.
The SCHEDULE Formula: How PCB Is Actually Calculated
LHDN publishes a multi-column SCHEDULE table each year. The formula is:
Monthly PCB = [(P - M) × R + B] / n
Each variable:
| Variable | Meaning |
|---|---|
| P | Chargeable income for the year (projected, cumulative) |
| M | Upper bound of the previous chargeable income bracket |
| R | Progressive tax rate for the current bracket |
| B | Cumulative tax payable up to M |
| n | Number of months remaining in the year (including current month) |
The calculation runs cumulatively. In January, P is your annualised chargeable income (monthly × 12). In February, P reflects 2 months of actual income. By December, P is your true full-year chargeable income, and the formula reconciles any over- or under-deduction across the previous months.
Step-by-Step Example: RM5,000 Monthly Salary
Let us walk through the PCB calculation for an employee earning RM5,000/month, with zero additional deductions beyond EPF. Assume the 11% EPF rate (statutory rate for employees under 60 before the 9% option was introduced).
Step 1: Calculate Monthly Net Remuneration
Gross salary: RM5,000 EPF deduction (11%): RM550 Monthly net: RM5,000 - RM550 = RM4,450
Step 2: Annualise the Chargeable Income
For January, LHDN projects full-year income based on January data:
Annual net: RM4,450 × 12 = RM53,400
Now subtract tax reliefs:
- Personal relief (mandatory): RM9,000
- EPF relief (capped at RM4,000): RM550 × 12 = RM6,600, capped at RM4,000
Annual chargeable income P = RM53,400 - RM9,000 - RM4,000 = RM40,400
Step 3: Apply the Progressive Tax Rate Table
LHDN's progressive income tax rates for resident individuals:
| Chargeable Income (RM) | Rate (%) | Cumulative Tax (RM) |
|---|---|---|
| 0 – 5,000 | 0 | 0 |
| 5,001 – 20,000 | 1 | 150 |
| 20,001 – 35,000 | 3 | 600 |
| 35,001 – 50,000 | 6 | 1,500 |
| 50,001 – 70,000 | 11 | 3,700 |
| 70,001 – 100,000 | 19 | 9,400 |
| 100,001 – 250,000 | 25 | 46,900 |
| 250,001 – 400,000 | 26 | 85,900 |
| 400,001 – 600,000 | 28 | 141,900 |
| 600,001 – 2,000,000 | 30 | 561,900 |
| Above 2,000,000 | 32 | — |
Step 4: Identify the Tax Bracket
P = RM40,400 falls in the RM35,001 – RM50,000 bracket.
From the SCHEDULE formula:
- M = RM35,000 (the ceiling of the previous bracket)
- R = 6%
- B = RM600 (cumulative tax up to RM35,000)
- n = 12 (remaining months in January)
Step 5: Plug Into the Formula
PCB = [(RM40,400 - RM35,000) × 6% + RM600] / 12 PCB = [(RM5,400 × 0.06) + RM600] / 12 PCB = [RM324 + RM600] / 12 PCB = RM924 / 12 PCB = RM77.00
So for January, the employer deducts RM77.00 in PCB.
Step 6: February Onwards — The Cumulative Effect
By February, P is calculated using 2 months of actual income instead of 1 month annualised. Cumulative net income = RM4,450 × 2 = RM8,900. Annualised = RM8,900 / 2 × 12 = RM53,400 (same annualised figure). But now:
- EPF relief (2 months): RM550 × 2 = RM1,100
- Personal relief: RM9,000 (full year)
Annual chargeable income P = RM53,400 - RM9,000 - RM4,000 = RM40,400 (still the same because the relief caps and income stay proportional).
n = 11 (remaining months).
PCB for February = [(RM40,400 - RM35,000) × 6% + RM600] / 11 = RM924 / 11 = RM84.00
But wait — the employee already paid RM77.00 in January. The February PCB = RM84.00 - RM77.00 = RM7.00 (the incremental amount for month 2). Actually, the formula as applied by payroll software tracks cumulative PCB paid year-to-date, so the actual deduction in February is RM84.00 - RM77.00 = RM7.00.
However, most payroll systems simplify this — they deduct RM84.00 in February and the RM77.00 from January stays. The cumulative year-to-date PCB at end of February is correctly RM77.00 + RM84.00 = RM161.00.
The point is this: PCB can fluctuate month to month even with a fixed salary, because the formula recalculates the annual projection each month and uses different 'n' values.
PCB for Bonus Months: Why You Get a Bigger Deduction
When your employer pays a bonus, your gross income for that month spikes. The PCB formula treats this as if your income has permanently increased, leading to a sharp jump in the deduction for that month.
For example, if the RM5,000/month employee gets a one-month bonus in June (total June income: RM10,000), the PCB for June is calculated using an inflated annualised P. The formula assumes you are now earning RM10,000 every month — pushing you into a higher tax bracket for that single month's computation.
The good news: the extra PCB deducted in the bonus month offsets your year-end tax liability. Many employees actually overpay PCB during bonus months and receive a refund after filing.
Read our detailed guide on this: PCB bonus month tax deduction spike explained.
How to Verify Your Employer's PCB Calculation
You do not need to trust your employer's payroll system. Here is how to check:
- Go to the DuitTools PCB calculator.
- Enter your monthly gross salary.
- Select your EPF contribution rate (9% or 11%).
- If applicable, enter your bonus or additional income for the month.
- The calculator shows the exact PCB for that month, matching the SCHEDULE formula.
Compare this number with your payslip. If there is a discrepancy, first check whether your employer is using a different EPF rate or whether you have additional deductions (SOCSO, EIS, etc.) that reduce your chargeable income. If the gap persists, contact your HR or payroll department and request a breakdown.
Can You Reduce Your PCB?
PCB is mandatory and cannot be reduced below the SCHEDULE calculation. However, you can lower your actual end-of-year tax liability by maximising tax reliefs:
- EPF + voluntary EPF contributions (up to RM4,000 combined relief)
- PRS contributions (up to RM3,000, separate relief)
- Medical expenses (up to RM1,000 for parents)
- Medical check-up (up to RM1,000)
- Education fees (up to RM7,000)
- Life insurance (up to RM3,000)
- Lifestyle relief (up to RM2,500 for books, gadgets, sports equipment, internet)
If you maximise these reliefs and your PCB exceeds your final tax liability, LHDN refunds the overpayment after you file your return (usually within 30-90 days for e-filing).
Read our full relief guide: Malaysia personal tax reliefs 2026.
Frequently Asked Questions
Why does my PCB increase in the later months of the year? Because the formula divides by a smaller 'n' (remaining months). In January, n=12. In November, n=2. A smaller denominator means a larger monthly PCB. Combined with any mid-year bonus or increment, the effect compounds.
I changed jobs mid-year. How does PCB work for my new employer? Your new employer will calculate PCB based only on the income they pay you. They may not have visibility into your previous employer's PCB history. This can cause under-deduction. Use TP1 (the new employment notification form) to inform your new employer of your year-to-date income and PCB from the previous employer, so they can adjust.
Is PCB the same as my final tax? No. PCB is a prepayment. Your final tax is calculated when you file your return (Form BE or Form B). If total PCB exceeds your tax liability, LHDN refunds the difference. If PCB is lower, you pay the shortfall.
What happens if my employer deducts too much PCB? You get the excess back as a tax refund after filing your Form BE/B. You cannot ask your employer to stop deducting PCB — they are legally required to follow the SCHEDULE.
Does the 9% EPF rate (effective January 2026 for eligible employees) increase my PCB? Yes. If you opt for the lower 9% EPF rate, your net remuneration after EPF increases, which increases your chargeable income and therefore your PCB. More money in your pocket now, but slightly higher tax deducted monthly. Read our EPF complete guide for details on the 9% option.
What is the difference between PCB and CP38? PCB is monthly deduction from employment income. CP38 is a separate LHDN instruction to employers to deduct additional amounts from salary for outstanding tax arrears. If you see a CP38 deduction on your payslip, it means LHDN has directed your employer to garnish wages for unpaid back taxes.
Check your monthly PCB in under 10 seconds with the DuitTools PCB calculator — no signup, no waiting, just enter your salary and see the number.